Concept explainers
FIFO method, spoilage. Refer to the information in Problem 18-35.
Required
Do Problem 18-35 using the FIFO method of
18-35 Weighted-average method, spoilage. World Class Steaks is a meat-processing firm based in Texas. It operates under the weighted-average method of process costing and has two departments: preparation (prep) and shipping. For the prep department, conversion costs are added evenly during the process, and direct materials are added at the beginning of the process. Spoiled units are detected upon inspection at the end of the prep process and are disposed of at zero net disposal value. All completed work is transferred to the shipping department. Summary data for May follow:
Required
For the prep department, summarize the total costs to account for and assign those costs to units completed and transferred out (including normal spoilage), to abnormal spoilage, and to units in ending work in process. (Problem 18-37 explores additional facets of this problem.)
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HORNGRENS COST ACCOUNTING CUSTOM FOR UC
- 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_forwardGourmet Master, Inc., uses activity-based costing to determine the cost of its stainless steel ovens. Activity-based product cost information is as follows: Activity Activity-BaseUsage (hrs. per unit) x Activity Rateper Hour = Activity Cost Fabrication 0.75 $24.00 $18.00 Assembly 1.50 20.00 30.00 Inspection 0.30 25.00 7.50 Moving 0.25 12.00 3.00 Total activity cost per unit $58.50 These activities only include the labor portion of the cost. Fabrication is the cutting and shaping of metal to be used in the assembly of the ovens. If the metal is not fabricated properly, additional time is required during final assembly to trim and adjust the metal pieces to fit properly. This has been a problem in Assembly. Management proposes improvements in Fabrication requiring the fabrication work to be done slower, but more accurately. As a result, the time in fabrication will increase to an hour per unit. However, because of the additional care, the…arrow_forwardOlive Company makes dessert pies for national convenient food chains. Olive Company is considering using ABC costing and has the following activity cost pools and information available: Activities Estimated Overhead Costs Estimated Activity Material handling measured by batches $251,000 2,000 batches Mixing measured by batches $110,000 3,520 batches Packaging measured by units $84,000 2,100,000 units Maintenance measured by # of setups $15,000 260 setups Olive Company currently uses a plantwide overhead rate based on total estimated machine hours of 100,000 hours. Based on their estimates for ABC costing, compute the allocated cost for all overhead costs for Job 607 using the following information about the job. # of units in the job = 4,900 # of units in each batch = 980 # of setups required to complete the job = 1 # of machine hours = 220arrow_forward
- XYZ is a manufacturer of furniture. It operates a weighted-average costing system and has two departments, cutting and assembly. The cutting department manufactures the furniture components and transfers them to the assembly department. In the assembly department, conversion costs are incurred evenly during the process, and direct materials are added when the assembly process is 80% completed. Spoiled units are detected when the conversion process is 70% completed. On average, XYZ expects spoiled units to be 5% of the good units that survived the inspection in the assembly department. The spoiled units are sold to a local shop for $8 per unit. The proceeds from the sale of spoiled units are credited to the cost of completed goods. In the month of January, 100 units were spoiled and sold to the local shop. Other data for the month of January,2021 are provided below: ASSEMBLY DEPARTMENT DATA FOR THE MONTH OF JANUARY, 2021 WIP, beginning inventory…arrow_forwardHusky Ltd. manufactures toys using a continuous production process that flows through two departments: Forming and Finishing. In the forming department, various components are built and are transferred to the finishing department. In the finishing department, those components are assembled into Husky’s final product and once finished, are transferred to Husky’s Finished Goods Inventory. Any spoilage is detected at the end of the process (i.e. when the toys are 100% complete). Husky uses the FIFO method of accounting for costs. In the Finishing Department, Direct materials are added at 70% of conversion and conversion costs are added evenly throughout the process. Finishing DepartmentPhysical UnitsTransferred InDirect Materials Conversion Work in Process January 1 37,000 $ 76,400 $ 0 $ 30,062Degree of Completion in beginning WIP 65%Units Transferred in from Forming in January 232,500Good Units Transferred Out 240,000Work In Process January 31 24,000Normal Spoilage as a percentage of…arrow_forwardRitz Company sells fine collectible statues and has implemented activity-based costing. Costs in the shipping department have been divided into three cost pools. The first cost pool contains costs that are related to packaging and shipping and Rand has determined that the number of boxes shipped is an appropriate cost driver for these costs. The second cost pool is made up of costs related to the final inspection of each item before it is shipped and the cost driver for this pool is the number of individual items that are inspected and shipped. The final cost pool is used for general operations and supervision of the department and the cost driver is the number of shipments. Information about the department is summarized below: Cost Pool Total Costs Cost Driver Annual Activity Packaging and $167,300 Number of boxes 21,800 boxes Shipping shipped Final Inspection $201,300…arrow_forward
- Ritz Company sells fine collectible statues and has implemented activity-based costing. Costs in the shipping department have been divided into three cost pools. The first cost pool contains costs that are related to packaging and shipping and Rand has determined that the number of boxes shipped is an appropriate cost driver for these costs. The second cost pool is made up of costs related to the final inspection of each item before it is shipped and the cost driver for this pool is the number of individual items that are inspected and shipped. The final cost pool is used for general operations and supervision of the department and the cost driver is the number of shipments. Information about the department is summarized below: Cost Pool Total Costs Cost Driver Annual Activity Packaging and shipping $168,100 Number of boxes shipped 20,600 boxes Final inspection $197,500 Number of individual items shipped 97,500 items General operations and supervision $81,900 Number of orders…arrow_forwardProcess Costing versus Alternative Costing Methods, Impact onResource Allocation DecisionGolding Manufacturing, a division of Farnsworth Sporting Inc., produces two different modelsof bows and eight models of knives. The bow-manufacturing process involves the productionof two major subassemblies: the limbs and the handles. The limbs pass through four sequential processes before reaching final assembly: layup, molding, fabricating, and finishing. In thelayup department, limbs are created by laminating layers of wood. In the molding department,the limbs are heat-treated, under pressure, to form strong resilient limbs. In the fabricating department, any protruding glue or other processing residue is removed. Finally, in the finishingdepartment, the limbs are cleaned with acetone, dried, and sprayed with the final finishes.The handles pass through two processes before reaching final assembly: pattern and finishing. In the pattern department, blocks of wood are fed into a machine that is…arrow_forwardMt. Palomar Manufacturing Co. uses a process cost system. Its manufacturing operation is carried on in two departments: Machining and Finishing. The Machining Department uses the weighted average cost method, and the Finishing Department uses the FIFO cost method. Materials are added in both departments at the beginning of operations, but the added materials do not increase the number of units being processed. Units are lost in the Machining Department throughout the production process, and inspection occurs at the end of the process. The lost units have no scrap value and are considered to be a normal loss. Production statistics for July show the following data: Required: Prepare a cost of production summary for each department. (Round unit costs to three decimal places.) Which department will have an easier time determining how its unit costs compare from month to month? Why?arrow_forward
- Healthway uses a process-costing system to compute the unit costs of the minerals that it produces. It has three departments: Mixing, Tableting, and Bottling. In Mixing, at the beginning of the process all materials are added and the ingredients for the minerals are measured, sifted, and blended together. The mix is transferred out in gallon containers. The Tableting Department takes the powdered mix and places it in capsules. One gallon of powdered mix converts to 1,600 capsules. After the capsules are filled and polished, they are transferred to Bottling where they are placed in bottles, which are then affixed with a safety seal and a lid and labeled. Each bottle receives 50 capsules. During July, the following results are available for the first two departments (direct materials are added at the beginning in both departments): Overhead in both departments is applied as a percentage of direct labor costs. In the Mixing Department, overhead is 200 percent of direct labor. In the Tableting Department, the overhead rate is 150 percent 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. Round unit cost to three decimal places. 2. Prepare a production report for the Tableting Department. Materials are added at the beginning of the process. Follow the five steps outlined in the chapter. Round unit cost to four decimal places.arrow_forwardAnalyzing process cost elements across product types Mystic Bottling Company bottles popular beverages in the Bottling Department. The beverages are produced by blending concentrate with water and sugar. The concentrate is purchased from a concentrate producer. The concentrate producer sets higher prices for the more popular concentrate flavors. A simplified Bottling Department cost of production report separating the cost of bottling the four flavors follows: Beginning and ending work in process inventories are negligible, so they are omitted from the cost of production report. The flavor changeover cost represents the cost of cleaning the bottling machines between production runs of different flavors. A production ran of a new flavor is produced after a flavor changeover from the previous flavor. Higher-demand flavors are produced in larger production runs, while smaller-demand flavors are produced in smaller production runs. Prepare a memo to the production manager, analyzing this comparative cost information. In your memo, provide recommendations for further action, along with supporting schedules showing the total cost per case and cost per case by cost element. Round supporting calculations to the nearest cent.arrow_forwardFreidrich is working with the operations manager to determine what the standard material cost is for a spice chest. He has watched the process from start to finish and taken detailed notes on what material is used. The easiest material to measure is the wood. Each chest uses 5 board feet and produces 1.5 feet of scrap. He is not sure what to do with the scrap that is produced; the company cannot buy the boards in any other dimensions. What amount of materials should be included in the standard for material costs?arrow_forward
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