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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

Sunrise Coffee Company roasts and packs coffee beans. The process begins in the Roasting Department. From the Roasting Department, the coffee beans are transferred to the Packing Department. The following is a partial work in process account of the Roasting Department at December 31:

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Instructions

Prepare a cost of production report, using the average cost method, and identify the missing amounts for Work in Process—Roasting 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.

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 cost of production report for roasting department during the month of December using average cost method of Company SC.

Explanation

To calculate the cost of production report for roasting department during the month of December using average cost method of Company SC as shown below:

Figure (1)

Working notes:

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

Ending work in process inventory - whole units) =10,500units +210,400units 208,900=12,000units

Calculate ending work in process inventory units as shown below:

Ending work in process inventory units) =(Ending work in process inventory whole units ×Percentage completed)

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