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Concept explainers
A company manufactures a liquid product called Crystal. The basic ingredients are put into process in Department 1. In Department 2, other materials are added that increase the number of units being processed by 50%. The factory has only two departments.
Calculate the following for each department: (a) unit cost for the month for materials, labor, and factory
1.
![Check Mark](/static/check-mark.png)
Compute unit cost for materials, labor and factory overhead, cost of the units transferred and cost of the ending work in process-department 1.
Explanation of Solution
Compute equivalent unit of production.
Particulars | Units |
Units finished and transferred out | 14,000 |
Ending work in process | 1,000 |
Total | 15,000 |
Table (1)
a. Compute unit cost.
Particulars | Amount ($) |
Materials | 6 |
Labor | 2 |
Factory overhead | 1 |
Total | 9 |
Table (2)
Working Notes:
Calculate the cost of work in process, end of month-material.
Calculate the cost of work in process, end of month-labor.
Calculate the cost of work in process, end of month-factory overhead.
b. Compute cost of units finished and transferred.
c. Compute total work in process, end of month.
Particulars | Amount ($) |
Materials | 6,000 |
Labor | 2,000 |
Factory overhead | 1,000 |
Total | 9,000 |
Table (3)
Working Notes:
Calculate the cost of work in process-material.
Calculate the cost of work in process-labor.
Calculate the cost of work in process-factory overhead.
2.
![Check Mark](/static/check-mark.png)
Compute unit cost for materials, labor and factory overhead, cost of the units transferred and cost of the ending work in process-department 2.
Explanation of Solution
Compute equivalent unit of production- department 2.
Particulars | Units |
Units finished and transferred out | 15,000 |
Ending work in process | 3,000 |
Total | 18,000 |
Table (4)
a. Compute unit cost-department 2.
Particulars | Amount ($) |
Materials | 2 |
Labor | 0.75 |
Factory overhead | 0.25 |
Total | 3 |
Table (5)
Working Notes:
Calculate the cost of work in process, end of month-material.
Calculate the cost of work in process, end of month-labor.
Calculate the cost of work in process, end of month-factory overhead.
b. Compute cost of units finished and transferred- department 2.
Particulars | Amount ($) |
Cost in department 1 | 90,000 |
Cost in department 2 | 45,000 |
Total | 135,000 |
Table (6)
Working Notes:
Calculate the cost in department 1.
(1) Calculate the adjusted unit cost.
(2) Calculate the new quantity.
Particulars | Amount ($) |
Units from department | 14,000 |
Units added | 7,000 |
New quantity | 21,000 |
Table (7)
Calculate the cost in department 2.
c. Compute work in process, end of month- department 2.
Particulars | Amount ($) | Amount ($) |
Cost in department 1 | 36,000 | |
Cost in department 2 | ||
Materials | 6,000 | |
Labor | 2,000 | |
Factory overhead | 1,000 | 9,000 |
Total | 45,000 |
Table (8)
Working Notes:
Calculate the cost of work in process-material.
Calculate the cost of work in process-labor.
Calculate the cost of work in process-factory overhead.
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Principles of Cost Accounting
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