Cheetah Accessories uses four departments to produce handles for kitchen cabinets: Forming requires mixing the raw materials, Moulding, Spraying and Drying. After leaving the Drying Department, the handles are packaged and sent to the Finished Goods warehouse for shipment to retail outlets. The following data relates to the Spraying Department for the month of June: During the month, 2,000 handles valued at $275 each were transferred from the Molding Department to the Spraying Department. Other production costs incurred during the month are summarized as follows: Direct Materials Added Direct Manufacturing Wages Manufacturing Overhead $171,000 $425,600 $205,200 Process inspection occurs during the process and normally no losses are expected at this stage. However, during the month 200 handles were rejected at inspection. Rejected units from this department are sold as scrap at $400 each. These units had reached the following degree of completion: Transfer from Moulding 100% Direct material added 80% Conversion costs 50% During June, 1,400 handles were completed, packaged and transferred to Finished Goods. Work-in-progress at the end of June had reached the following degree of completion: Transfer from Moulding 100% Materials added 60% Conversion costs 40% Materials added and conversion costs are incurred uniformly throughout each process. There were no incomplete units in the Spraying Department at the beginning of the period. Required: (a) Compute the equivalent units and cost per equivalent units for direct materials (From Moulding & Direct materials added) and conversion costs. (b) Compute the: -total cost of the handles completed and transferred out of the Drying Department - cost of the unexpected losses -cost of ending work in process inventory in the Spraying Department (c) Post all transactions to the Work in Process Inventory – Spraying Department T-account. What is the ending balance? (d) Prepare the journal entries for the use of total direct materials, direct labour incurred, manufacturing overhead applied and the cost of the units completed and transferred out to the Drying Process. (e) Given that 25% of the unexpected losses were as a result of pilferage, calculate Chrome Accessories true loss for the Spraying Department.
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Cheetah Accessories uses four departments to produce handles for kitchen cabinets: Forming requires mixing the raw materials, Moulding, Spraying and Drying.
After leaving the Drying Department, the handles are packaged and sent to the Finished Goods warehouse for shipment to retail outlets. The following data relates to the Spraying Department for the month of June:
During the month, 2,000 handles valued at $275 each were transferred from the Molding Department to the Spraying Department. Other production costs incurred during the month are summarized as follows:
Direct Materials Added Direct Manufacturing Wages Manufacturing Overhead $171,000 $425,600 $205,200
Process inspection occurs during the process and normally no losses are expected at this stage. However, during the month 200 handles were rejected at inspection.
Rejected units from this department are sold as scrap at $400 each. These units had reached the following degree of completion:
Transfer from Moulding 100% Direct material added 80% Conversion costs 50%
During June, 1,400 handles were completed, packaged and transferred to Finished Goods.
Work-in-progress at the end of June had reached the following degree of completion:
Transfer from Moulding 100% Materials added 60% Conversion costs 40%
Materials added and conversion costs are incurred uniformly throughout each process. There were no incomplete units in the Spraying Department at the beginning of the period.
Required:
(a) Compute the equivalent units and cost per equivalent units for direct materials (From Moulding & Direct materials added) and conversion costs.
(b) Compute the:
-total cost of the handles completed and transferred out of the Drying Department
- cost of the unexpected losses
-cost of ending work in process inventory in the Spraying Department
(c)
(d) Prepare the
(e) Given that 25% of the unexpected losses were as a result of pilferage, calculate Chrome Accessories true loss for the Spraying Department.
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