Tools & More uses three departments to produce plastic handles for screwdrivers. Forming the handles require mixing the raw materials, molding and drying. After the drying process, the screwdrivers are completed by assembling the handles and the shanks and packing for shipment. The following information relates to the molding process: There was no opening WIP stock 5,000 kilos of material at $43.08 per kilo entered the process Direct materials added $92,000 Direct wages incurred 65,700 Production overhead 75,100 Normal loss is 4% of input A quality control check was done at the end of the molding process and 350 handles were rejected as spoilage. Spoiled units, regardless of their degree of completion, are sold at $45.00 each, and it is company’s policy to credit the process account with the scrap value of the normal loss units. Closing WIP was 800 units but these were incomplete, having reached the following percentages of completion for each of the elements of cost listed. Input material 100% Direct material added 75% Conversion costs 50% Required: i) Compute the number of equivalent units of work performed by the Molding Department during the period and the cost per equivalent unit for direct materials and conversion costs. ii) Assign total cost to: a) Units completed and transferred out to the Drying Department b) Units rejected as abnormal spoilage c) Units in the Molding department work in process inventory. iii) Prepare the journal entries to record the assignment of direct materials, direct wages and the allocation of manufacturing overhead to the Molding Department Account, as well as, the cost of the units completed and transferred out to the Drying 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.
Question 3
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Tools & More uses three departments to produce plastic handles for screwdrivers. Forming the handles require mixing the raw materials, molding and drying. After the drying process, the screwdrivers are completed by assembling the handles and the shanks and packing for shipment. The following information relates to the molding process: There was no opening WIP stock
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|
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5,000 kilos of material at $43.08 per kilo entered the process |
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|
Direct materials added |
$92,000 |
|
Direct wages incurred |
65,700 |
|
Production overhead |
75,100 |
|
Normal loss is 4% of input |
A quality control check was done at the end of the molding process and 350 handles were rejected as spoilage. Spoiled units, regardless of their degree of completion, are sold at $45.00 each, and it is company’s policy to credit the process account with the scrap value of the normal loss units.
Closing WIP was 800 units but these were incomplete, having reached the following percentages of completion for each of the elements of cost listed.
|
Input material |
100% |
|
Direct material added |
75% |
|
Conversion costs |
50% |
Required:
i) Compute the number of equivalent units of work performed by the Molding Department during the period and the cost per equivalent unit for direct materials and conversion costs.
ii) Assign total cost to:
a) Units completed and transferred out to the Drying Department
b) Units rejected as abnormal spoilage
c) Units in the Molding department work in process inventory.
iii) Prepare the
iv)
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