Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN: 9781305970663
Author: Don R. Hansen, Maryanne M. Mowen
Publisher: Cengage Learning
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Question
Chapter 6, Problem 44P
1.
To determine
Calculate cost per bag of chemicals transferred to finished goods using the FIFO method.
1.
Expert Solution
Explanation of Solution
Calculate cost per bag of chemicals transferred out to finished goods.
Therefore, cost per bag of chemical transferred out to finished goods is $341.65.
Working notes:
Calculate physical flow schedule for baking department.
| Particulars | Units | Workings |
| Units to account for: | ||
| Beginning work in process | 10,000 | (5,000 × 2) |
| Units started | 100,000 | (50,000 ×2) |
| Total units to account for | 110,000 | |
| Units accounted for: | ||
| Units transferred out | 100,000 | (110,000 - 10,000) |
| Add: Normal spoilage | 5,000 | |
| Abnormal spoilage | 5,000 | |
| Total units accounted for | 110,000 |
Table (1)
Prepare equivalent units of production for baking department
| Particulars | Conversion costs | Transferred In |
| Units started and completed | 90,000 | 90,000 |
| Equivalent units in beginning work in process | 7,500 | 0 |
| Normal spoilage | 2,500 | 5,000 |
| Abnormal spoilage | 2,500 | 5,000 |
| Total equivalent units | 102,500 | 100,000 |
Table (2)
Prepare equivalent cost per unit for baking department.
| Particulars | Conversion | Transferred In |
| Cost (A) | $205,000 | $250,000 |
| Equivalent units of production (B) | 102,500 | 100,000 |
| Cost per unit (A ÷ B) | $2 | $2.50 |
Table (3)
Calculate cost of goods transferred out.
| Particulars | Amount | Amount |
| Started and completed (90,000 × ($2 + $2.50) | $405,000 | |
| Units from beginning work in process: | ||
| Prior period costs | $35,000 | |
| Cost to finished (7,500 × $2) | $15,000 | $50,000 |
| Normal spoilage (2,500 × $2)+ (2,500 × $2.50) | $17,500 | |
| Total | $472,500 |
Table (4)
Calculate abnormal spoilage loss for banking department.
Calculate physical flow schedule for grinding department.
| Particulars | Units | Workings |
| Units to account for: | ||
| Beginning work in process | 500 | (25,000 ÷50) |
| Units started | 2,000 | (100,000 ÷50) |
| Total units to account for | 2,500 | |
| Units accounted for: | ||
| Started and completed | 2,000 | (110,000 - 10,000) |
| Add: Beginning work in process | 500 | |
| Total units accounted for | 2,500 |
Table (5)
Prepare equivalent units of production for grinding
Figure (1)
Prepare equivalent cost per unit for grinding department.
| Particulars | Direct Materials | Conversion | Transferred In |
| Cost in beginning work in process | $0 | $15,000 | $132,500 |
| Add: Cost added (A) | $4,125 | $172,500 | $472,500 |
| Total costs | $4,125 | $187,500 | $605,000 |
| Equivalent units of production (B) | 2,500 | 2,300 | 2,000 |
| Cost per unit (A ÷ B) | $1.65 | $75 | $236.25 |
Table (6)
Calculate cost added for direct materials.
Calculate total prior costs for grinding department.
Calculate ending work in process inventory for direct materials.
Calculate ending work in process inventory for conversion cost.
2.
To determine
Prepare
2.
Expert Solution
Explanation of Solution
Prepare journal entry to record to remove spoilage from the baking and grinding departments
| Date | Account titles and Explanation | Debit | Credit |
| Loss Due to spoilage | $17,500 | ||
| Work in process - Baking department | $17,500 | ||
| (To record remove spoilage for baking department) |
Table (7)
- Loss due to spoilage is a component of
stockholders’ equity , and it is decreased. Therefore, debit loss due to spoilage account for $17,500. - Work in process inventory- Baking department is a current asset, and it is decreased. Therefore, credit work in process inventory – Baking department account for $17,500.
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Chapter 6 Solutions
Cornerstones of Cost Management (Cornerstones Series)
Ch. 6 - What is a process? Provide an example that...Ch. 6 - Describe the differences between process costing...Ch. 6 - Prob. 3DQCh. 6 - What are transferred-in costs?Ch. 6 - Explain why transferred-in costs are a special...Ch. 6 - What is a production report? What purpose does...Ch. 6 - Can process costing be used for a service...Ch. 6 - What are equivalent units? Why are they needed in...Ch. 6 - How is the equivalent unit calculation affected...Ch. 6 - Describe the five steps in accounting for the...
Ch. 6 - Under the weighted average method, how are...Ch. 6 - Under what conditions will the weighted average...Ch. 6 - In assigning costs to goods transferred out, how...Ch. 6 - Prob. 14DQCh. 6 - What is operation costing? When is it used?Ch. 6 - Lamont Company produced 80,000 machine parts for...Ch. 6 - Lising Therapy has a physical therapist who...Ch. 6 - Fleming, Fleming, and Johnson, a local CPA firm,...Ch. 6 - During October, McCourt Associates incurred total...Ch. 6 - Tomar Company produces vitamin energy drinks. The...Ch. 6 - Apeto Company produces premium chocolate candy...Ch. 6 - Jackson Products produces a barbeque sauce using...Ch. 6 - Gunnison Company had the following equivalent...Ch. 6 - Jackson Products produces a barbeque sauce using...Ch. 6 - Morrison Company had the equivalent units schedule...Ch. 6 - Shorts Company has three process departments:...Ch. 6 - A local barbershop cuts the hair of 1,200...Ch. 6 - Friedman Company uses JIT manufacturing. There are...Ch. 6 - Lacy, Inc., produces a subassembly used in the...Ch. 6 - Softkin Company manufactures sun protection...Ch. 6 - Heap Company manufactures a product that passes...Ch. 6 - K-Briggs Company uses the FIFO method to account...Ch. 6 - The following data are for four independent...Ch. 6 - Using the data from Exercise 6.18, compute the...Ch. 6 - Holmes Products, Inc., produces plastic cases used...Ch. 6 - Dama Company produces womens blouses and uses the...Ch. 6 - Fordman Company has a product that passes through...Ch. 6 - Using the same data found in Exercise 6.22, assume...Ch. 6 - Baxter Company has two processing departments:...Ch. 6 - Tasty Bread makes and supplies bread throughout...Ch. 6 - Under either weighted average or FIFO, when...Ch. 6 - During the month of June, the mixing department...Ch. 6 - As goods are transferred from a prior process to a...Ch. 6 - During March, Hanks Manufacturing started and...Ch. 6 - Proteger Company manufactures insect repellant...Ch. 6 - Swasey Fabrication, Inc., manufactures frames for...Ch. 6 - Refer to the data in Problem 6.31. Assume that the...Ch. 6 - Hatch Company produces a product that passes...Ch. 6 - FIFO Method, Single Department Analysis, One Cost...Ch. 6 - Hepworth Credit Corporation is a wholly owned...Ch. 6 - Muskoge Company uses a process-costing system. The...Ch. 6 - Prob. 37PCh. 6 - Healthway uses a process-costing system to compute...Ch. 6 - FIFO Method, Two-Department Analysis Refer to the...Ch. 6 - Jacson Company produces two brands of a popular...Ch. 6 - Golding Manufacturing, a division of Farnsworth...Ch. 6 - Larkin Company produces leather strips for western...Ch. 6 - Novel Toys, Inc., manufactures plastic water guns....Ch. 6 - Prob. 44P
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