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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Cost of production report

The Culling Department of Karachi Carpet Company provides the following data for January. Assume that all materials are added at the beginning of the process.

Work in process. January 1, 1,400 units, 75% completed   $ 22,960*
*Direct materials (1,400 × $ 12,65) $17,710
Conversion (1,400 x 75% × $5.00) 5,250
$22,960  
Materials added during January from Weaving Department, 58,000 units   $742,400
Direct labor for January   134,550
Factory overhead for January   151,611
Goods finished during January (includes goods in process, January 1), 56,200 units
Work in process, January 31, 3,200 units, 30% completed  

a. Prepare a cost of production report for the Cutting Department.

b. Compute and evaluate the change in the costs per equivalent unit for direct materials and conversion from the previous month (December).

(a)

To determine

Process costs

It is a method of cost accounting, which is used where the production is continuous, and the product needs various processes to complete. This method is used to ascertain the cost of the product at each process or stage of production.

Equivalents units for production

The activity of a processing department in terms of fully completed units is known as equivalent units. It includes the completed units of direct materials and conversion cost of beginning work in process, units completed and transferred out, and ending work in process.

Production cost report

A production cost report is a comprehensive report prepared for each department separately at the end of a particular period, which represents the physical flow and cost flow of product for the concerned department.

To Determine: The equivalents units for production of direct materials and conversion costs for the month of January for Company KC.

Explanation

Calculate the equivalents units for production of direct materials and conversion costs for the month of January for Company KC as shown below:

Figure (1)

Working notes:

Calculate opening work in process inventory for conversion costs as shown below:

Opening work in process inventory for conversion costs) = 175%=25%

Calculate units started and completed in August as shown below:

Units started and completed in August = (Units received from weaving departmentEnding work in process inventory)=58,000units 3,200

To determine
The direct materials and conversion cost equivalent cost per unit for January.

To determine
The cost of goods finished during the month of January.

To determine
The cost of ending work in process inventory during the month of August.

To determine
The cost of production report for cutting department during the month of January for Company KC.

 (b)

To determine

To Compute: The change in cost per equivalent unit for direct material and conversion cost comparing with December month.

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