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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

Flowchart of accounts related to service and processing departments

Alcoa Inc. is the world's largest producer of aluminum products. One product that Alcoa manufactures is aluminum .sheet products for the aerospace industry. The entire output of the Smelting Department is transferred to the Rolling Department. Part of the fully processed goods from the Rolling Department are sold as rolled sheet, and the remainder of the goods are transferred to the Converting Department for further processing into sheared sheet.

Prepare a diagram using T accounts showing the flow of costs from the processing department accounts into the finished goods accounts and then into the cost of goods sold account. The relevant accounts are as follows:

Cost of Goods Sold

Materials

Factory Overhead—Smelting Department

Factory Overhead—Rolling Department

Factory Overhead—Converting Department

Finished Goods—Rolled sheet

Finished Goods—Sheared Sheet

Work in Process—Smelting Department

Work in Process—Rolling Department

Work in Process—Converting Department

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.

To Prepare: The flow chart of costs from processing department account to cost of goods sold for Incorporation A.

Explanation

Prepare the flow chart of costs from processing department account to cost of goods sold for Incorporation A as shown below:

Materials inventory transferred to work in process inventory – smelting department and factory overhead – smelting department, next process is work in process inventory – smelting department and factory overhead – smelting department is transferred to work in process – rolling department and factory overhead &...

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