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Operation costing. Egyptian Spa produces two different spa products: Relax and Refresh. The company uses three operations to manufacture the products: mixing, blending, and packaging. Because of the materials used, Relax is produced in powder form in the mixing department, then transferred to the blending department, and finally on to packaging. Refresh undergoes no mixing; it is produced in liquid form in the blending department and then transferred to packaging.
Egyptian Spa applies conversion costs based on labor-hours in the mixing department. It takes 3 minutes to mix the ingredients for a container of Relax. Conversion costs are applied based on the number of containers in the blending departments and on the basis of machine-hours in the packaging department. It takes 0.5 minutes of machine time to fill a container, regardless of the product.
The budgeted number of containers and expected direct materials cost for each product are as follows:
Relax | Refresh | |
Number of containers | 24,000 | 18,000 |
Direct materials cost | $17,160 | $13,140 |
The budgeted conversion costs for each department for May are as follows:
Department | Allocation of Conversion Costs | Budgeted Conversion Cost |
Mixing | Direct labor-hours | $11,760 |
Blending | Number of containers | $20,160 |
Packaging | Machine-hours | $ 2,800 |
- 1. Calculate the conversion cost rates for each department.
- 2. Calculate the budgeted cost of goods manufactured for Relax and Refresh for the month of May.
- 3. Calculate the cost per container for each product for the month of May.
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Chapter 17 Solutions
EBK HORNGREN'S COST ACCOUNTING
- Benson Pharmaceuticals uses a process-costing system to compute the unit costs of the over-the-counter cold remedies that it produces. It has three departments: mixing, encapsulating, and bottling. In mixing, the ingredients for the cold capsules are measured, sifted, and blended (with materials assumed to be uniformly added throughout the process). The mix is transferred out in gallon containers. The encapsulating department takes the powdered mix and places it in capsules (which are necessarily added at the beginning of the process). One gallon of powdered mix converts into 1,500 capsules. After the capsules are filled and polished, they are transferred to bottling, where they are placed in bottles that are then affixed with a safety seal, lid, and label. Each bottle receives 50 capsules. During March, the following results are available for the first two departments: Overhead in both departments is applied as a percentage of direct labor costs. In the mixing department, overhead is 200% of direct labor. In the encapsulating department, the overhead rate is 150% of direct labor. Required: 1. Prepare a production report for the mixing department using the weighted average method. Follow the five steps outlined in the chapter. (Note: Round to two decimal places for the unit cost.) 2. Prepare a production report for the encapsulating department using the weighted average method. Follow the five steps outlined in the chapter. (Note: Round to four decimal places for the unit cost.) 3. CONCEPTUAL CONNECTION Explain why the weighted average method is easier to use than FIFO. Explain when weighted average will give about the same results as FIFO.arrow_forwardSusu Segar Sdn Bhd is the producer of dairy products. One of its products, Milky is the main product for the company. The production of Milky involves two sequential processing departments namely Freezing Department and Packaging Department. In Freezing Department, all direct materials are added at the beginning of the process. Whereas in Packaging Department, all direct materials are added at the ending of the process. Conversion cost occurs uniformly throughout the production process for both departments. The following information relates to Packaging Department for the month of October 2006: Cost of beginning work in process inventory: Transferred-in Direct materials Direct labour Manufacturing overhead Percentage of completion (conversion cost): Beginning work in process inventory Ending work in process inventory RM61,000 RM69,000 RM40,000 RM24,200 60% 70% Cost in the current period:…arrow_forwardPBB Company manufactures high end product. Because of the high volume of this type of product, the company employs a process cost system using the weighted average method to determine costs. Product Parts are manufactured in the Molding Department and transferred to the assembly Department were they are partially assembled. After assembly, the product is sent to packaging department. Cost per unit data for the high end product has been completed through the Molding department. Annual cost and production figures for the assembly Department are presented below: Production Data Beg. Inventory 50% Complete as to Assembly materials; 20% complete 3,000 as to Conversion units 45,000 Transferred In during the year units 40,000 Transferred to Packaging Department units 4,000 Ending Inventory 80% complete units Cost Data: Transferred-In Materials Conversion Current Period P 1,240,800 P 97,020 P 236,470 Work in Process, beginning 82,200 6,660 11,930 Damage product are identified on inspection…arrow_forward
- Makani Handcraft is a manufacturer of picture frames for large retailers. Every picture frame passes through two departments: the assembly department and the finishing department. This problem focuses on the assembly department. The process-costing system at Makani has a single direct-cost category (direct materials) and a single indirect-cost category (conversion costs). Direct materials are added at the beginning of the process. Conversion costs are added evenly during the assembly department's process. Consider the following data for the assembly department in June 2020: Physical units (Frames) Direct materials Direct labour Work in progress (June 1) 80 $1,500 $150 Completed during June 500 Work in progress June 30 200 Total costs added during June $17,800 $11,500 Degree of completion is as follows: Work in progress (June 1): 100% 60% Work in progress June 30 100% 25% Required: Compute the costs assigned to products using two methods: 1. Weighted average method (WAM); | 2. First in…arrow_forwardJorcano Manufacturing Company, which uses a process cost system to account for the costs of its only product, Product D. Production begins in the fabrication department where units of raw material are molded into various connecting parts. After fabrication is complete, the units are transferred to the assembly department. There is no material added in the assembly department. After assembly is complete, the units are transferred to a packaging department where packing material is placed around the units. After the units are ready for shipping, they are sent to a shipping area. At year-end, June 30, the following inventory of Product D is on hand: No unused raw material or packing material. Fabrication department: 300 units, 1/3 complete as to raw material and 1/2 complete as to direct labor. Assembly department: 1,000 units , 2/5 complete as to direct labor. Packaging department: 100 units 3/4 complete as to packing material and 1/4 complete as to direct labor. Shipping area: 400 units…arrow_forwardTime Clock Shop manufactures clocks on an automated assembly line. It utilizes two cost categories: direct materials and conversion costs. Each product must pass through the Assembly Department and the Testing Department. Direct materials are added at the beginning of production, while conversion costs are allocated evenly throughout production. The company uses weighted-average costing. Data for the Assembly Department are given in the table. (Click the icon to view the table.) What is the total amount debited to the work-in-process account during the month of June at Time Clock Shop? A. $450,000 B. $2,270,000 C. $3,250,000 D. $2,000,000 E. $2,450,000 Table Work in process, beginning inventory Direct materials (100% complete) Conversion costs (50% complete) Units started during June Work in process, ending inventory Direct materials (100% complete) Conversion costs (75% complete) Work in process, beginning inventory Direct materials Conversion costs Direct materials costs added during…arrow_forward
- Direct, indirect, fixed, and variable costs. California Tires manufactures two types of tires that it sells as wholesale products to various specialty retail auto supply stores. Each tire requires a three-step process. The first step is mixing. The mixing department combines some of the necessary direct materials to create the material mix that will become part of the tire. The second step includes the forming of each tire where the materials are layered to form the tire. This is an entirely automated process. The final step is finishing, which is an entirely manual process. The finishing department includes curing and quality control. 1. Costs involved in the process are listed next. For each cost, indicate whether it is a direct variable, direct fixed, indirect variable, or indirect fixed cost, assuming "units of production of each kind of tire" is the cost object. Costs: Rubber Mixing department manager Material handlers in each department Custodian in factory Night guard in factory…arrow_forwardCarter, Incorporated, produces two products, Product A and Product B. Carter uses a traditional volume-based costing system in which direct labor hours are the allocation base. Carter is considering switching to an ABC system by splitting its manufacturing overhead cost across three activities: Design, Production, and Inspection. The cost of each activity and usage of the cost drivers are as follows: Activity Pool (Driver) Design (engineering hours) Production (direct labor hours) Inspection (batches) Cost of Pool $ 300,000 500,000 200,000 300,000 100 Carter manufactures 10,000 units of Product A and 7,500 units of Product B per month. Required: a. Calculate the predetermined overhead rate under the traditional costing system. b. Calculate the activity rate for Design. c. Calculate the activity rate for Machining. d. Calculate the activity rate for Inspection. e. Calculate the indirect manufacturing costs assigned to each unit of Product A under the traditional costing system. f.…arrow_forward[The following information applies to the questions displayed below.] Victory Company uses weighted average process costing. The company has two production processes. Conversion cost is added evenly throughout each process. Direct materials are added at the beginning of the first process. Additional information for the first process follows. Beginning work in process inventory Units started this period Units completed and transferred out Ending work in process inventory. Beginning work in process inventory. Direct materials Conversion Costs added this period Direct materials Conversion Total costs to account for Cost per equivalent unit of production Units Total costs + Equivalent units of production (from part 1) Cost per equivalent unit of production 78,000 876,000 760,000 194,000 $ 496,080 87,640 3,319,920 1,665, 160 Direct Materials. Percent Complete 100% 100% 2. Compute cost per equivalent unit of production for both direct materials and conversion. Costs EUP $ 583,7: 4,985,0…arrow_forward
- Way Cool produces two different models of air conditioners. The company produces the mechanical systems in its components department. The mechanical systems are combined with the housing assembly in its finishing department. The activities, costs, and drivers associated with these two manufacturing processes and the production support process follow. (Loss amounts should be indicated with a minus sign. Round your intermediate calculations and round "Cost per unit and OH rate" answers to 2 decimal places.) Activity Changeover Machining Process Overhead Cost Driver Quantity $ 453,500 302,000 229,500 Components Number of batches 870 Machine hours 7,640 Setups Number of setups 220 $ 985,000 $ 181,100 227,000 Welding hours Number of inspections Finishing Welding Inspecting 4,800 790 Rework 60,250 Rework orders 200 Purchasing Providing space Providing utilities $ 468,350 $ 137,000 30,550 60,300 Support Purchase orders 458 Number of units 5,400 5,400 Number of units $ 227,850 Additional…arrow_forwardCarrie's Limited has two departments, the assembly department and the testing department in its brake-pad manufacturing plant, where each brake-pad is conveyed through each department. Carrie's process-costing system consist of two cost categories: Single direct cost (direct materials) and a single indirect-cost category (conversion costs). Direct materials are added at the beginning of the process. Conversion costs are added evenly during the process. When the assembly department finishes work on each brake-pad, it is immediately transferred to testing. Carrie's uses the weighted-average method of process costing. Data for the assembly department for October 2019 are as follows: Physical Units (Brake Pads) Work in process, October 1* 6,000 Started during October 2019 21,000 Completed during October 2019 23,500 Direct Materials $1,200,000 Work in process, October 31 3,500 Total costs added during October 2019 $4,600,000 x Degree of completion: direct materials, 100%; conversion costs,…arrow_forwardCentral Perk, LLC, a manufacturer of coffee beans, is considering switching its operations to an Activity Based Costing system. The following manufacturing overhead activities and cost drivers have been identified: Activity. Machine setup Machine assembly Product inspection Product movement General factory Cost Driver Number of machine setups Machine hours logged Inspection hours logged Number of moves Machine hours logged Based on the above descriptions, which of the following correctly pairs the activity with its appropriate cost level? O A. Product Inspection... batch level cost OB. Product Movement... facility level cost O C. Machine Assembly... unit level cost O D. General Factory... batch level cost O E. Machine Setup... unit level costarrow_forward
- Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage LearningManagerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage LearningManagerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub
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