Concept explainers
Dama Company produces women’s blouses and uses the FIFO method to account for its
Costs in beginning work in process were direct materials, $20,000; conversion costs, $80,000. Manufacturing costs incurred during April were direct materials, $240,000; conversion costs, $320,000.
Required:
- 1. Prepare a physical flow schedule for April.
- 2. Compute the cost per equivalent unit for April.
- 3. Determine the cost of ending work in process and the cost of goods transferred out.
- 4. Prepare the
journal entry that transfers the costs from Cutting to Sewing.
1.
Prepare the schedule of physical flow.
Explanation of Solution
Process Costing: It is a method of cost accounting used by an enterprise with processes categorised by continuous production. The cost for manufacturing those products are assigned to the manufacturing department before the averaged over units are being produced.
Prepare the schedule of physical flow.
Particulars | Units |
Units to account for: | |
Units, beginning work in process | 10,000 |
Units started | 60,000 |
Total units to account for | 70,000 |
Units accounted for: | |
Units started completed | 40,000 |
Units, beginning work in process | 10,000 |
Units, ending work in process | 20,000 |
Total units accounted for | 70,000 |
(Table 1)
2.
Calculate the cost per equivalent unit for the month April.
Explanation of Solution
Calculate the cost per equivalent unit for the month April.
Working note 1: Calculate the unit material cost.
Working note 2: Calculate the unit conversion cost.
3.
Ascertain the value of cost of EWIP and the cost of goods transferred out.
Explanation of Solution
Ascertain the value of cost of EWIPs.
Particulars | Amount in $ |
Ending work in process: | |
Direct materials (3) | 80,000 |
Conversion cost (4) | 32,000 |
Total cost of ending work in process | 112,000 |
(Table 2)
Ascertain the cost of goods transferred out.
Particulars | Amount in $ |
Cost of goods transferred out: | |
Units started and completed (5) | 416,000 |
Units, beginning work in process: | |
Prior-period cost | 100,000 |
Current costs to finish (6) | 32,000 |
Total cost of goods transferred out | 548,000 |
(Table 3)
Working note 3: Calculate the units of direct materials during ending work in process.
Working note 4: Calculate the units of conversion cost during ending work in process.
Working note 5: Calculate the value of the units that were started and completed.
Working note 6: Calculate the current cost to finish.
4.
Journalize the given transaction.
Explanation of Solution
Journalize the given transaction.
Date | Accounts title and explanation |
Debit ($) |
Credit ($) |
Work in process (Sewing) | 548,000 | ||
Work in process (Cutting) | 548,000 | ||
(To record transfer of cost from cutting to sewing) |
(Table 4)
- Work in (sewing) is an asset and there is an increase in the value of an asset. Hence, debit the work in process account by $548,000.
- Work in process (cutting) is an asset and there is a decrease in the value of an asset. Hence, credit the work in process account by $548,000.
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Chapter 6 Solutions
Cornerstones of Cost Management (Cornerstones Series)
- Holmes Products, Inc., produces plastic cases used for video cameras. The product passes through three departments. For April, the following equivalent units schedule was prepared for the first department: Costs assigned to beginning work in process: direct materials, 90,000; conversion costs, 33,750. Manufacturing costs incurred during April: direct materials, 75,000; conversion costs, 220,000. Holmes uses the weighted average method. Required: 1. Compute the unit cost for April. 2. Determine the cost of ending work in process and the cost of goods transferred out.arrow_forwardPetrini Products Co. has two departments: Mixing and Cooking. At the beginning of the month, Cooking had 4,000 units in process with costs of 8,600 from Mixing, and its own departmental costs of 500 for materials, 1,000 for labor, and 2,500 for factory overhead. During the month, 10,000 units were received from Mixing with a cost of 25,000. Cooking incurred costs of 4,250 for materials, 8,500 for labor, and 21,250 for factory overhead, and finished 12,000 units. At the end of the month, there were 2,000 units in process, one-half completed. Required: 1. Determine the unit cost for the month in Cooking. 2. Determine the adjusted weighted average unit cost for all units received from Mixing. 3. Determine the unit cost of goods finished. 4. Determine the accumulated cost of the goods finished and of the ending work in process. (Round unit costs to three decimal places.)arrow_forwardBox Springs. Inc., makes two sizes of box springs: queen and king. The direct material for the queen is $35 per unit and $55 is used in direct labor, while the direct material for the king is $55 per unit, and the labor cost is $70 per unit. Box Springs estimates it will make 4,300 queens and 3,000 kings in the next year. It estimates the overhead for each cost pool and cost driver activities as follows: How much does each unit cost to manufacture?arrow_forward
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