Concept explainers
a.
Prepare a production cost report using FIFO.
a.
Explanation of Solution
First in and first out (FIFO) method:
Under this method cost of units sold and units lying as ending inventory is ascertained on the first in and first out basis. It means units entered in the store first would be sold out first.
Compute the total units of prior department, materials, labor and manufacturing
Particulars | Physical units | Prior department | Materials | Labor | Manufacturing overhead |
Beginning work-in-process inventory | 75,000 | ||||
Units started this period | 375,000 | ||||
Total units | 450,000 | ||||
Completed and transferred out | |||||
Beginning work-in-process inventory | 75,000 | - | - | 30,000(1) | 37,500(2) |
Started and currently completed | 225,000 | 225,000 | 225,000 | 225,000 | 225,000 |
Units in ending work-in-process inventory | 150,000 | 150,000 | 135,000(3) | 105,000(4) | 52,500(5) |
Total units | 450,000 | 375,000 | 360,000 | 360,000 | 315,000 |
Table: (1)
Compute the cost per equivalent unit of prior department, materials, labor and manufacturing overhead:
Particulars | Total | Prior department | Materials | Labor | Manufacturing overhead |
Costs in beginning work-in-process inventory | $ 382,800 | $ 192,000 | $ 120,000 | $ 43,200 | $ 27,600 |
Current period costs | $ 1,865,400 | $ 960,000 | $ 576,000 | $ 216,000 | $ 113,400 |
Total costs | $ 2,248,200 | $ 1,152,000 | $ 696,000 | $ 259,200 | $ 141,000 |
Cost per equivalent unit | |||||
Prior department | $ 2.56(6) | ||||
Materials | $ 1.60(7) | ||||
Labor | $ 0.60(8) | ||||
Manufacturing overhead | $ 0.36(9) |
Table: (2)
Compute the total cost of prior department, materials, labor and manufacturing overhead:
Particulars | Total | Prior department | Materials | Labor | Manufacturing overhead |
Transferred out: | |||||
Costs from beginning inventory | $ 382,800 | $ 192,000 | $ 120,000 | $ 43,200 | $ 27,600 |
Current costs beginning work-in-process inventory | |||||
Prior department | $ 0 | $ 0 | |||
Materials | $ 0 | $ 0 | |||
Labor | $ 18,000 | $ 18,000(10) | |||
Manufacturing overhead | $ 13,500 | $ 13,500(11) | |||
Total costs | $ 414,300 | ||||
Current costs of units started and completed | |||||
Prior department | $ 576,000 | $ 576,000(12) | |||
Materials | $ 360,000 | $ 360,000(13) | |||
Labor | $ 135,000 | $ 135,000(14) | |||
Manufacturing overhead | $ 81,000 | $ 81,000(15) | |||
Total costs of units started and completed | $ 1,152,000 | ||||
Total costs | $ 1,566,300 | $ 576,000 | $ 360,000 | $ 153,000 | $ 94,500 |
Current costs work-in-process ending inventory | |||||
Prior department | $ 384,000 | $ 384,000(16) | |||
Materials | $ 216,000 | $ 216,000(17) | |||
Labor | $ 63,000 | $ 63,000(18) | |||
Manufacturing overhead | $ 18,900 | $ 18,900(19) | |||
Total ending work-in-process inventory | $ 681,900 | ||||
Total costs accounted for | $ 2,279,700 | $ 1,152,000 | $ 696,000 | $ 277,200 | $ 154,500 |
Table: (3)
Working note 1:
Compute the beginning inventory:
Working note 2:
Compute the beginning inventory:
Working note 3:
Compute the units in ending inventory:
Working note 4:
Compute the units in ending inventory:
Working note 5:
Compute the units in ending inventory:
Working note 6:
Compute the cost per equivalent unit:
Working note 7:
Compute the cost per equivalent unit:
Working note 8:
Compute the cost per equivalent unit:
Working note 9:
Compute the cost per equivalent unit:
Working note 10:
Compute the current costs added to complete beginning work-in-process inventory:
Working note 11:
Compute the current costs added to complete beginning work-in-process inventory:
Working note 12:
Compute the current costs of units started and completed:
Working note 13:
Compute the current costs of units started and completed:
Working note 14:
Compute the current costs of units started and completed:
Working note 15:
Compute the current costs of units started and completed:
Working note 16:
Compute the current costs of units started and completed:
Working note 17:
Compute the current costs of units started and completed:
Working note 18:
Compute the current costs of units started and completed:
Working note 19:
Compute the current costs of units started and completed:
b.
Determine whether the targets assigned by the management have been achieved or not. Write a short report on the same.
b.
Explanation of Solution
Computed cost per equivalent units:
Particulars | Cost per equivalent unit |
Materials | $ 1.60 |
Labor | $ 0.60 |
Manufacturing overhead | $ 0.36 |
Table: (4)
Targeted cost per equivalent units:
Particulars | Cost per equivalent unit |
Materials | $ 1.60 |
Labor | $ 0.80 |
Manufacturing overhead | $ 0.36 |
Table: (5)
Relevance of reported computed result and targeted result for materials, labor and manufacturing overhead:
The target determined by the management for materials and manufacturing overhead have been achieved. Only for labor the cost per equivalent unit has not achieved. The targeted cost per equivalent unit for labor was $0.80 but the actual cost per equivalent unit has been computed to $0.60. Thus, the target has been achieved and reduced further when computed using FIFO method for the computation.
Want to see more full solutions like this?
Chapter 8 Solutions
FUNDAMENTALS OF COST ACCT.(LL)-W/ACCESS
- Use the following information for Brief Exercises 4-34 and 4-35: Sanjay Company manufactures a product in a factory that has two producing departments, Assembly and Painting, and two support departments, S1 and S2. The activity driver for S1 is square footage, and the activity driver for S2 is number of machine hours. The following data pertain to Sanjay: Brief Exercises 4-34 (Appendix 4B) Assigning Support Department Costs by Using the Direct Method Refer to the information for Sanjay Company above. Required: 1. Calculate the cost assignment ratios to be used under the direct method for Departments S1 and S2. (Note: Each support department will have two ratiosone for Assembly and the other for Painting.) 2. Allocate the support department costs to the producing departments by using the direct method.arrow_forwardUse the following information for Brief Exercises 4-27 and 4-28: Quillen Company manufactures a product in a factory that has two producing departments, Cutting and Sewing, and two support departments, S1 and S2. The activity driver for S1 is number of employees, and the activity driver for S2 is number of maintenance hours. The following data pertain to Quillen: Brief Exercises 4-27 (Appendix 4B) Assigning Support Department Costs by Using the Direct Method Refer to the information for Quillen Company above. Required: 1. Calculate the cost assignment ratios to be used under the direct method for Departments S1 and S2. (Note: Each support department will have two ratiosone for Cutting and the other for Sewing.) 2. Allocate the support department costs to the producing departments by using the direct method.arrow_forwardActivity-based product costing Sweet Sugar Company manufactures three products (white sugar, brown sugar, and powdered sugar) in a continuous production process. Senior management has asked the controller to conduct an activity-based costing study. The controller identified the amount of factory overhead required by the critical activities of the organization as follows: The activity bases identified for each activity are as follows: The activity-base usage quantities and units produced for the three products were determined from corporate records and are as follows: Each product requires 0.5 machine hour per unit. Instructions Determine the activity rate for each activity. Determine the total and per-unit activity cost for all three products. Round to nearest cent. Why arent the activity unit costs equal across all three products since they require the same machine time per unit?arrow_forward
- Activity-based department rate product costing and product cost distortions Big Sound Inc. manufactures two products: receivers and loudspeakers. The factory overhead incurred is as follows: The activity base associated with the two production departments is direct labor hours. The indirect labor can be assigned to two different activities as follows: The activity-base usage quantities and units produced for the two products follow: Instructions Determine the factory overhead rates under the multiple production department rate method. Assume that indirect labor is associated with the production departments, so that the total factory overhead is 420,000 and 294,000 for the Subassembly and Final Assembly departments, respectively. Determine the total and per-unit factory overhead costs allocated to each product, using the multiple production department overhead rates in (1). Determine the activity rates, assuming that the indirect labor is associated with activities rather than with the production departments. Determine the total and per-unit cost assigned to each product under activity-based costing. Explain the difference in the per-unit overhead allocated to each product under the multiple production department factory overhead rate and activity-based costing methods. production department factory overhead rate and activity-based costing methods.arrow_forwardFIFO Method, Single Department Analysis, One Cost Category Refer to the data in Problem 6.33. Required: Prepare a cost of production report for the Fabrication Department for December using the FIFO method of costing.arrow_forwardCrystal Scarves Co. produces winter scarves. The scarves are produced in the Cutting and Sewing departments. The Maintenance and Security departments support these production departments, and allocate costs based on machine hours and square feet, respectively. Information about each department is provided in the following table: Using the sequential method and allocating the support department with the highest costs first, allocate all support department costs to the production departments. Then compute the total cost of each production department.arrow_forward
- Multiple production department factory overhead rates The management of Spotted Cow Dairy Company, described in Problem 1B, now plans to use the multiple production department factory overhead rate method. The total factory overhead associated with each department is as follows: Instructions Determine the multiple production department factory overhead rates, using machine hours for the Blending Department and direct labor hours for the Packing Department. Determine the product factory overhead costs, using the multiple production department rates in (1).arrow_forwardDavis Co. uses backflush costing to account for its manufacturing costs. The trigger points are the purchase of materials, the completion of goods, and the sale of goods. Prepare journal entries to account for the following: a. Purchased raw materials, on account, 70,000. b. Requisitioned raw materials to production, 70,000. c. Distributed direct labor costs, 15,000. d. Factory overhead costs incurred, 45,000. (Use Various Credits for the account in the credit part of the entry.) e. Completed all of the production started. f. Sold the completed production for 195,000, on account. (Hint: Use a single account for raw materials and work in process.)arrow_forwardThe increases to Work in ProcessRoasting Department for Highlands Coffee Company for May as well as information concerning production are as follows: Prepare a cost of production report for May, using the weighted average method. Assume that direct materials are placed in process during production.arrow_forward
- Kenkel, Ltd. uses backflush costing to account for its manufacturing costs. The trigger points are the purchase of materials, the completion of goods, and the sale of goods. Prepare journal entries to account for the following: a. Purchased raw materials, on account, 80,000. b. Requisitioned raw materials to production, 80,000. c. Distributed direct labor costs, 10,000. d. Factory overhead costs incurred, 60,000. (Use Various Credits for the account in the credit part of the entry.) e. Completed all of the production started. f. Sold the completed production for 225,000, on account.arrow_forwardLampierre makes brass and gold frames. The company computed this information to decide whether to switch from the traditional allocation method to ABC: The estimated overhead for the material cost pool is estimated as $12,500, and the estimate for the machine setup pool is $35,000. Calculate the allocation rate per unit of brass and per unit of gold using: A. The traditional allocation method B. The activity-based costing methodarrow_forwardSeacrest Company uses a process-costing system. The company manufactures a product that is processed in two departments: A and B. As work is completed, it is transferred out. All inputs are added uniformly in Department A. The following summarizes the production activity and costs for November: Required: 1. Using the weighted average method, prepare the following for Department A: (a) a physical flow schedule, (b) an equivalent unit calculation, (c) calculation of unit costs (Note: Round to four decimal places.), (d) cost of EWIP and cost of goods transferred out, and (e) a cost reconciliation. 2. CONCEPTUAL CONNECTION Prepare journal entries that show the flow of manufacturing costs for Department A. Use a conversion cost control account for conversion costs. Many firms are now combining direct labor and overhead costs into one category. They are not tracking direct labor separately. Offer some reasons for this practice.arrow_forward
- Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College PubFinancial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,Managerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage Learning
- Principles of Cost AccountingAccountingISBN:9781305087408Author:Edward J. Vanderbeck, Maria R. MitchellPublisher:Cengage LearningCornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage LearningExcel Applications for Accounting PrinciplesAccountingISBN:9781111581565Author:Gaylord N. SmithPublisher:Cengage Learning