Pittsburgh Aluminum Company uses a process cost system to record the costs of manufacturing rolled aluminum, which consists of the smelting and rolling processes. Materials are entered from smelting at the beginning of the rolling process. The inventory of Work in Process—Rolling on September 1 and debits to the account during September were as follows:Bal., 2,600 units, ¼ completed:Direct materials (2,600 × $15.50) $40,300Conversion (2,600 × ¼ × $8.50) 5,525 $45,825From Smelting Department, 28,900 units 462,400Direct labor 158,920Factory overhead 101,402During September, 2,600 units in process on September 1 were completed, and of the 28,900 units entering the department, all were completed except 2,900 units that were 4⁄5 completed.Charges to Work in Process—Rolling for October were as follows:From Smelting Department, 31,000 units $511,500Direct labor 162,850Factory overhead 104,494During October, the units in process at the beginning of the month were completed, and of the 31,000 units entering the department, all were completed except 2,000 units that were 2⁄5 completed.Instructions1. Enter the balance as of September 1 in a four-column account for Work in Process— Rolling. Record the debits and credits in the account for September. Construct a cost of production report and present computations for determining(a) equivalent units of production for materials and conversion; (b) cost per equivalent unit; (c) cost of goods finished, differentiating between units started in the prior period and units started and finished in September; and (d) work in process inventory.2. Provide the same information for October by recording the October transactions in the four-column work in process account. Construct a cost of production report and present the October computations (a through d) listed in part (1).3. Comment on the change in costs per equivalent unit for August throughOctober for direct materials and conversion cost.
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.
Pittsburgh Aluminum Company uses a
Bal., 2,600 units, ¼ completed:
Direct materials (2,600 × $15.50) $40,300
Conversion (2,600 × ¼ × $8.50) 5,525
$45,825
From Smelting Department, 28,900 units 462,400
Direct labor 158,920
Factory overhead 101,402
During September, 2,600 units in process on September 1 were completed, and of the 28,900 units entering the department, all were completed except 2,900 units that were 4⁄5 completed.
Charges to Work in Process—Rolling for October were as follows:
From Smelting Department, 31,000 units $511,500
Direct labor 162,850
Factory overhead 104,494
During October, the units in process at the beginning of the month were completed, and of the 31,000 units entering the department, all were completed except 2,000 units that were 2⁄5 completed.
Instructions
1. Enter the balance as of September 1 in a four-column account for Work in Process— Rolling. Record the debits and credits in the account for September. Construct a cost of production report and present computations for determining
(a) equivalent units of production for materials and conversion; (b) cost per equivalent unit; (c) cost of goods finished, differentiating between units started in the prior period and units started and finished in September; and (d) work in process inventory.
2. Provide the same information for October by recording the October transactions in the four-column work in process account. Construct a cost of production report and present the October computations (a through d) listed in part (1).
3. Comment on the change in costs per equivalent unit for August through
October for direct materials and conversion cost.
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