Chapter 5, Problem 13P

Tanaka Manufacturing Co. uses the process cost system. The following information for the month of December was obtained from the company’s books and from the production reports submitted by the department heads:

Required:

1. 1. Prepare cost of production summaries for the Mixing, Blending, and Bottling (Hint: You must calculate the adjusted unit cost from Blending.) departments.
2. 2. Prepare a departmental cost work sheet.
3. 3. Draft the journal entries required to record the month’s operations.
4. 4. Prepare a statement of cost of goods manufactured for December. (Hint: Goods finished but not transferred to finished goods are considered part of work in process inventory.)

To determine

Prepare cost of production summaries for the mixing, blending and bottling.

Explanation of Solution

Prepare cost of production summaries for the mixing, blending and bottling.

Company T
Cost of Production Summary-Mixing
For the Month Ended December 31
Cost of work in process, beginning of month:
Materials	$1,470
Labor	$650
Factory overhead	$565	$2,685
Cost of production for month:
Materials	$15,000
Labor	$4,750
Factory overhead	$5,240	$24,990
Total costs to be accounted for		$27,675
Unit output for month:
Finished and transferred to Blending during month		$13,000
Equivalent units of work in process, end of month
(2,000 units, one-fourth completed)		$500
Total equivalent production		$13,500
Unit cost for month:
Materials $\left(\text{\$1,470 + \$15,000}\right)\text{ ÷13,500}$		$1.22
Labor $\left(\text{\$650 + \$4,750}\right)\text{ ÷ 13,500}$		$0.4
Factory overhead $\left(\text{\$565 + \$5,240}\right)\text{ ÷ 13,500}$		$0.43
Total		$2.05
Inventory costs:
Costs of goods finished and transferred to Blending		$26,650
during month $\left(\text{13,000 × \$2}\text{.05}\right)$
Cost of work in process, end of month:
Materials $\left(\text{2,000 × 1/4 × \$1}\text{.22}\right)$	$610
Labor $\left(\text{2,000 × 1/4 × \$}\text{.40}\right)$	$200
Factory overhead $\left(\text{2,000 × 1/4 × \$}\text{.43}\right)$	$215	$1,025
Total production costs accounted for		$27,675

Table (1)

Company T
Cost of Production Summary-Blending
For the Month Ended December 31
Cost of work in process, beginning of month:
Cost in Mixing		$3,075
Cost in Blending:
Materials	$240
Labor	$905
Factory overhead	$750	$1,895	$4,970
Cost of goods received from Mixing during month			$26,650
Cost of production for month:
Materials		$2,500
Labor		$8,000
Factory overhead		$6,100	$16,600
Total costs to be accounted for			$48,220
Unit output for month:
Finished and transferred to Bottling during month			$10,000
Finished and on hand			$500
Equivalent units of work in process, end of month
(4,000 units, four-fifths completed)			$3,200
Total equivalent production			$13,700
Unit cost for month:
Materials $\left(\text{\$240 + \$2,500}\right)\text{ ÷13,700}$			$.20
Labor $\left(\text{\$905 + \$8,000}\right)\text{ ÷ 13,700}$			$.65
Factory overhead $\left(\text{\$750 + \$6,100}\right)\text{ ÷ 13,700}$			$.50
Total			$1.35
Inventory costs:
Costs of goods finished and transferred to Bottling
during month:
Cost in Mixing        $\left(\text{10,000 × \$2}\text{.05}\right)$		$20,500
Cost in Blending     $\text{(10,000 × \$1}\text{.35)}$		$13,500
$\left(\text{10,000 × \$3}\text{.40}\right)$			$34,000
Cost of goods finished and on hand:
Cost in Mixing        $\left(\text{500 × \$2}\text{.05}\right)$		$1,025
Cost in Blending      $\left(\text{500 × 1}\text{.35}\right)$		$675
$\left(\text{500 × \$3}\text{.40}\right)$			$1,700
Cost of work in process, end of month:
Cost in Mixing $\left(\text{4,000 × \$2}\text{.05}\right)$		$8,200
Cost in Blending:
Materials $\left(\text{4,000 × 4/5 × \$}\text{.20}\right)$	$640
Labor $\left(\text{4,000 × 4/5 × \$}\text{.65}\right)$	$2,080
Factory overhead $\left(\text{4,000 × 4/5 × \$}\text{.50}\right)$	$1,600	$4,320	$12,520
Total production costs accounted for			$48,220

Table (2)

Company T
Cost of Production Summary-Bottling
For the Month Ended December 31
Cost of work in process, beginning of month:
Cost in Mixing		$6,150
Cost in Blending		$3,660
		$9,810
Cost in Bottling:
Materials	$900
Labor	$3,100
Factory overhead	$3,080	$7,080	$16,890
Cost of goods received from Blending			$34,000
Cost of production for month:
Materials		$1,500
Labor		$6,500
Factory overhead		$7,000	$15,000
Total costs to be accounted for			$65,890
Unit output for month:			$11,000
Finished and transferred to finished goods
Equivalent units of work in process, end of month
(2,000 units, one-half completed)			$1,000
Total equivalent production			$12,000
Unit cost for month:
Materials $\left(\text{\$900 + \$1,500}\right)\text{ ÷ 12,000}$			$.20
Labor $\left(\text{\$3,100 + \$6,500}\right)\text{ ÷ 12,000}$			$.80
Factory overhead $\left(\text{\$3,080 + \$7,000}\right)\text{ ÷12,000}$			$.84
Total			$  1.84
Inventory costs:
Costs of goods finished and transferred:
Cost in Mixing        $\left(\text{11,000 × \$2}\text{.05}\right)$			$22,500
Cost in Blending $\left(\text{11,000 × \$1}\text{.32}\right)$			$14,520
Cost in Bottling      $\left(\text{11,000 × \$1}\text{.32}\right)$			$20,240
$\left(\text{11,000 × \$5}\text{.21}\right)$			$57,310
Cost in work in process, end of month:
Cost in Mixing $\left(\text{2,000 × \$2}\text{.05}\right)$		$4,100
Cost in Blending $\text{(2,000 x \$1}\text{.32}\left(\text{Working note1}\right)\text{)}$		$2,640
Cost in Bottling:
Materials $\left(\text{2,000 × 1/2 × \$}\text{.20}\right)$	$200
Labor $\left(\text{2,000 × 1/2 × \$}\text{.80}\right)$	$800
Factory overhead $\left(\text{2,000 × 1/2 × \$}\text{.84}\right)$	$840	$1,840	$8,580
Total production costs accounted for			$65,890

Table (3)

Working note:

(1)Prepare unit cost of blending:

Particulars	Units	Blending
Units in process, beginning of month	3,000	$3,660
Units received during month	10,000	13,500
Total	13,000	$17,160
Unit cost		$1.32

Table (4)

To determine

Prepare a departmental cost work sheet.

Explanation of Solution

Prepare a departmental cost work sheet for mixing department.

Figure (1)

Prepare a departmental cost work sheet for blending department.

Figure (2)

Prepare a departmental cost work sheet for bottling department.

Figure (3)

Prepare summary:

Summary:	Amount	Amount
Materials:
Mixing	$15,000
Blending	$2,500
Bottling	$1,500	$19,000
Labor:
Mixing	$4,750
Blending	$8,000
Bottling	$6,500	$19,250
Factory overhead:
Mixing	$5,240
Blending	$6,100
Bottling	$7,000	$18,340
Total production costs for December
Add work in process, beginning of month:
Mixing	$2,685
Blending	$4,970
Bottling	$16,890	$24,545
Total		$81,135
Deduct work in process, end of month:
Mixing	$1,025
Blending (includes $1,700 finished and on hand)	$14,220
Bottling	$8,580	$23,825
Cost of production, goods fully manufactured during
December		$57,310

Table (5)

To determine

Prepare journal entries to record the month’s operations.

Explanation of Solution

Prepare journal entries to record the month’s operations.

Date	Account Title and Explanation	Debit ($)	Credit ($)
	Work in Process-Mixing	15,000
	Work in Process-Blending	2,500
	Work in Process-Bottling	1,500
	Materials		19,000
	Work in Process-Mixing	4,750
	Work in Process-Blending	8,000
	Work in Process-Bottling	6,500
	Payroll		19,250
	Work in Process-Mixing	5,240
	Work in Process-Blending	6,100
	Work in Process-Bottling	7,000
	Factory Overhead		18,340
	Work in Process-Blending	26,650
	Work in Process-Mixing		26,650
	Work in Process-Bottling	34,000
	Work in Process-Blending		34,000
	Finished Goods	57,310
	Work in Process-Bottling		57,310

Table (6)

To determine

Prepare statement of cost of goods manufactured.

Explanation of Solution

Prepare statement of cost of goods manufactured.

Company T
Statement of Cost of Goods Manufactured
For the Month Ended December 31
Materials	$19,000
Labor	$19,250
Factory overhead	$18,340
Total	$56,590
Add work in process inventories, December 1	$24,545
Total	$81,135
Less work in process inventories, December 31	$23,825
Cost of goods manufactured during the month	$57,310

Table (7)