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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: average cost method

Prepare cost of production report for the Cutting Department of Dalton Carpet Company for January. Use the average cost method with the following data:

Work in process. January 1,3,400 pounds 75% completed $ 23,000
Materials added during January from Weaving  Department, 64,000 units 366,200
Direct labor for January 105,100
Factory overhead for January 80,710
Goods finished during January (includes goods in process, January 1), 63,500 units
Work in process. January t. 3.400 units. 75% completed

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 Prepare: The production cost report for January using average cost method of Company DC.

Explanation

Calculate production cost report for January using average cost method of Company DC as shown below:

Figure (1)

Working notes:

Calculate units for ending work in process inventory as shown below:

Ending work in process inventoryunits ) = (Whole units for ending work in process × Completed percentage)=3,900units ×10%=390units

Calculate total costs for January in cutting department as shown below:

Total costs for May =(Opening work in process inventory costs + Direct material costs +direct labor costs + Factory overhead costs)=$23,000+$366,200+$105,100+$80,710=$575,010

Calculate costs incurred in January as shown below:

Costs incurred in May=(Direct&#

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