During July, the following results are available for the first two departments (direct materials are added at the beginning in both departments): Mixing Tableting Beginning inventories: Physical units 5 gallons 4,000 capsules Costs: Direct materials $ 120 32 Direct labor 128 20 Overhead ? ? Transferred in 140 Current production: Transferred out Ending inventory Costs: 125 gallons 6. 198,000 capsules 6,000 Direct materials $3,144 S 1,584 Transferred in Direct labor 4,096 1,944 Overhead ? ? Percentage of completion: Beginning inventory Ending inventory 40% 50% 50 40 Overhead in both departments is applied as a percentage of direct labor costs. In the Mixing Department, overhead is 200 percent of direct labor. In the Tableting Department, the overhead rate is 150 percent of direct labor.
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.
Weighted Average Method, Two-Department Analysis, Change in
Output Measure
Healthway uses a process-costing system to compute the unit costs of the minerals that it pro-
duces. It has three departments: Mixing, Tableting, and Bottling. In Mixing, at the beginning of
the process all materials are added and the ingredients for the minerals are measured, sifted, and
blended together. The mix is transferred out in gallon containers. The Tableting Department takes the powdered mix and places it in capsules. One gallon of powdered mix converts to 1,600
capsules. After the capsules are filled and polished, they are transferred to Bottling where they are placed in bottles, which are then affixed with a safety seal and a lid and labeled. Each bottle
receives 50 capsules.
Required:
1. Prepare a production report for the Mixing Department using the weighted average method.
Follow the five steps outlined in the chapter. Round unit cost to three decimal places.
2. Prepare a production report for the Tableting Department. Materials are added at the be-
ginning of the process. Follow the five steps outlined in the chapter. Round unit cost to four decimal places.
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