Operation Costing, Just-in-Time System and Backflush Costing 26911. ExercisesExercise 1 (Operation Costing)The Packo Company, a small manufacturer, makes a variety of tool boxes.The company's manufacturing operations and their costs for November wereCutting Assembly FinishingP16,50022.900P39,400TotalDirect manufacturing laborManufacturing overheadP2,6003.000P5,600P4,800 P23.9003.30029,200P8,100 P53,100Three styles of boxes were produced in November. The quantities and directmaterials costs wereStyleStandardQuantity1,200600Direct materialsP18,0006,6005.400P30,060HomeIndustrial200The company uses actual costing. It takes direct materials to each style ofbox. It combines direct manufacturing labor and manufacturing overhead andallocates the conversion costs on the basis of all product units passingthrough an operation. All product units are assumed to receive an identicalamount of time and effort in each operation. The industrial style, however,does not go through the finishing operation.Required:1. Tabulate the conversion costs of each operation, the total units produced,and the conversion costs per unit for November.2. Calculate the total costs and the cost per unit of each style of boxproduced in November. Be sure to account for all the total costs.3. Prepare summary journal entries for each operation. For simplicity,assume that all direct materials are introduced at the beginning of thecutting operation. Also, assume that all units were transferred to finishedgoods when completed and that there was no beginning or ending workinprocess. Prepare one summary entry for all conversion costs incurred,but prepare a separate entry for allocating conversion costs in eachoperation.

Question
Asked Nov 8, 2019
Operation Costing, Just-in-Time System and Backflush Costing 269
11. Exercises
Exercise 1 (Operation Costing)
The Packo Company, a small manufacturer, makes a variety of tool boxes.
The company's manufacturing operations and their costs for November were
Cutting Assembly Finishing
P16,500
22.900
P39,400
Total
Direct manufacturing labor
Manufacturing overhead
P2,600
3.000
P5,600
P4,800 P23.900
3.300
29,200
P8,100 P53,100
Three styles of boxes were produced in November. The quantities and direct
materials costs were
Style
Standard
Quantity
1,200
600
Direct materials
P18,000
6,600
5.400
P30,060
Home
Industrial
200
The company uses actual costing. It takes direct materials to each style of
box. It combines direct manufacturing labor and manufacturing overhead and
allocates the conversion costs on the basis of all product units passing
through an operation. All product units are assumed to receive an identical
amount of time and effort in each operation. The industrial style, however,
does not go through the finishing operation.
Required:
1. Tabulate the conversion costs of each operation, the total units produced,
and the conversion costs per unit for November.
2. Calculate the total costs and the cost per unit of each style of box
produced in November. Be sure to account for all the total costs.
3. Prepare summary journal entries for each operation. For simplicity,
assume that all direct materials are introduced at the beginning of the
cutting operation. Also, assume that all units were transferred to finished
goods when completed and that there was no beginning or ending work
in
process. Prepare one summary entry for all conversion costs incurred,
but prepare a separate entry for allocating conversion costs in each
operation.
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Operation Costing, Just-in-Time System and Backflush Costing 269 11. Exercises Exercise 1 (Operation Costing) The Packo Company, a small manufacturer, makes a variety of tool boxes. The company's manufacturing operations and their costs for November were Cutting Assembly Finishing P16,500 22.900 P39,400 Total Direct manufacturing labor Manufacturing overhead P2,600 3.000 P5,600 P4,800 P23.900 3.300 29,200 P8,100 P53,100 Three styles of boxes were produced in November. The quantities and direct materials costs were Style Standard Quantity 1,200 600 Direct materials P18,000 6,600 5.400 P30,060 Home Industrial 200 The company uses actual costing. It takes direct materials to each style of box. It combines direct manufacturing labor and manufacturing overhead and allocates the conversion costs on the basis of all product units passing through an operation. All product units are assumed to receive an identical amount of time and effort in each operation. The industrial style, however, does not go through the finishing operation. Required: 1. Tabulate the conversion costs of each operation, the total units produced, and the conversion costs per unit for November. 2. Calculate the total costs and the cost per unit of each style of box produced in November. Be sure to account for all the total costs. 3. Prepare summary journal entries for each operation. For simplicity, assume that all direct materials are introduced at the beginning of the cutting operation. Also, assume that all units were transferred to finished goods when completed and that there was no beginning or ending work in process. Prepare one summary entry for all conversion costs incurred, but prepare a separate entry for allocating conversion costs in each operation.

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Expert Answer

Step 1

The cost have been allocated between the given three products as follows

1 Computation of Conversion cost
Industrial Total
Standard Home
Explanation
Units Produced (a)
Allocation of Cutting costs (b)
Allocation of Assembly costs
Allocation of finishing cost (d)
Total conversion costs (b+c+d)
Conversion cost per unit (total
conversion cost/number of units
produced)
1200
600
200
2000
5600 (Cost allocated in the ratio 12:6:2
39400 (Cost allocated in the ratio 12:6:2
8100 (Cost allocated in the ratio 12:6:0
3360
1680
560
23640
11820
3940
5400
2700
0
32400
16200
4500
53100
27
27
22.5
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1 Computation of Conversion cost Industrial Total Standard Home Explanation Units Produced (a) Allocation of Cutting costs (b) Allocation of Assembly costs Allocation of finishing cost (d) Total conversion costs (b+c+d) Conversion cost per unit (total conversion cost/number of units produced) 1200 600 200 2000 5600 (Cost allocated in the ratio 12:6:2 39400 (Cost allocated in the ratio 12:6:2 8100 (Cost allocated in the ratio 12:6:0 3360 1680 560 23640 11820 3940 5400 2700 0 32400 16200 4500 53100 27 27 22.5

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Step 2
2 Computation of Total costs
Standard Home
Industrial Total
Units Produced
Direct Materials
Conversion cost
Total costs (Direct Materials+
conversion cost)
Total cost/per unit (Total cost/units
produced)
2000
1200
600
200
18000
6600
5400
30000
4500
32400
16200
53100
50400
22800
9900
83100
42
38
49.5
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2 Computation of Total costs Standard Home Industrial Total Units Produced Direct Materials Conversion cost Total costs (Direct Materials+ conversion cost) Total cost/per unit (Total cost/units produced) 2000 1200 600 200 18000 6600 5400 30000 4500 32400 16200 53100 50400 22800 9900 83100 42 38 49.5

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Step 3
Accounts & Explanation
Work in progress-Assembly operation
Work in progress-cutting operation
(Transfer of WIP from cutting to Assembly)
Debit
35600
Credit
Date
35600
Direct Manufacturing Labor
Wages Payable
(Recording of Direct labor expenses)
23900
23900
Work in progress-Assembly operation
39400
Direct labor
16500
Manufacturing overhead
Expenses Payable
(Recording of Mnufacturing overhead)
Manufacturing Overhead
(Allocation of labor and manufacturing cost)
22900
23900
23900
Work in progress-Finishing operation
Finished goods- Industrial
65100
Work in progress-cutting operation
Raw materials Inventory
(Allocation of raw materials to cutting)
9900
30000
Work in progress-Assembly operation
(Transfer of WIP from Assembly to
Finishing & Finished Industrial boxes to
Finished nventory)
75000
30000
Work in progress-cutting operation
5600
Direct labor
2600
Manufacturing Overhead
(Allocation of labor and manufacturing cost)
3000
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Accounts & Explanation Work in progress-Assembly operation Work in progress-cutting operation (Transfer of WIP from cutting to Assembly) Debit 35600 Credit Date 35600 Direct Manufacturing Labor Wages Payable (Recording of Direct labor expenses) 23900 23900 Work in progress-Assembly operation 39400 Direct labor 16500 Manufacturing overhead Expenses Payable (Recording of Mnufacturing overhead) Manufacturing Overhead (Allocation of labor and manufacturing cost) 22900 23900 23900 Work in progress-Finishing operation Finished goods- Industrial 65100 Work in progress-cutting operation Raw materials Inventory (Allocation of raw materials to cutting) 9900 30000 Work in progress-Assembly operation (Transfer of WIP from Assembly to Finishing & Finished Industrial boxes to Finished nventory) 75000 30000 Work in progress-cutting operation 5600 Direct labor 2600 Manufacturing Overhead (Allocation of labor and manufacturing cost) 3000

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