Epsilon Co. manufactures a product that is processed through two departments. The following information was obtained for the first department in January: All direct materials are added at the beginning of the process, while conversion costs are added evenly throughout the process. Inspection takes place when the units are 40% complete. Normal spoilage is 2% of good units passing inspection in the period. All spoiled units are discarded. Beginning work-in-process (WIP) consisted of 100,000 units, 45% complete with respect to conversion costs. Costs in beginning inventory included direct materials of $122,750 and conversion costs of $200,920. There were 247,500 units started during the month, and costs added to production during the month totaled $303,800 for direct materials and $497,200 in conversion costs. A total of 250,000 units were transferred to the second department, and 93,900 units remained in ending WIP, 20% complete. Required: Prepare a process costing production cost report assuming a FIFO approach. Be sure to indicate the cost of good units transferred out, the cost of abnormal spoilage, and the value of ending inventory. Repeat part (a) but assuming a Weighted Average approach.
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.
Epsilon Co. manufactures a product that is processed through two departments. The following information was obtained for the first department in January:
All direct materials are added at the beginning of the process, while conversion costs are added evenly throughout the process.
Inspection takes place when the units are 40% complete. Normal spoilage is 2% of good units passing inspection in the period. All spoiled units are discarded.
Beginning work-in-process (WIP) consisted of 100,000 units, 45% complete with respect to conversion costs.
Costs in beginning inventory included direct materials of $122,750 and conversion costs of $200,920.
There were 247,500 units started during the month, and costs added to production during the month totaled $303,800 for direct materials and $497,200 in conversion costs.
A total of 250,000 units were transferred to the second department, and 93,900 units remained in ending WIP, 20% complete.
Required:
Prepare a
Repeat part (a) but assuming a Weighted Average approach.
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