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Chapter 18: Q17RQ (page 1006)
What are transferred in costs? When do they occur?
The transferred in cost means the total cost of the product of one department, which is transferred to another department for further processing. It occurs when the manufacturing of a product passes through more than one process.
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Refer to your answers from Exercise E18-21.
Requirements
1. Prepare the journal entries to record the assignment of direct materials and direct labor and the allocation of manufacturing overhead to the Blending Department. Also, prepare the journal entry to record the costs of the gallons completed and transferred out to the Packaging Department. Assume labor costs are accrued and not yet paid.
2. Post the journal entries to the Work-in-Process Inventory鈥擝lending T-account.
What is the ending balance?
3. What is the average cost per gallon transferred out of the Blending Department
into the Packaging Department? Why would the company managers want to
know this cost?
Collins Company has the following data for the Assembly Department for August:
Unit in process at the beginning of august | 900 |
Units started in august | 2,000 |
Units completed and transferred | 2,100 |
Units in process at the end of august | 800 |
Conversion costs are added evenly throughout the process. The company uses the weighted-average method. Compute the equivalent units of production for direct materials and conversion costs for each independent scenario:
1. Units in process at the end of August are 20% complete; materials are added at the beginning of the process.
2. Units in process at the end of August are 80% complete; materials are added at the beginning of the process.
3. Units in process at the end of August are 20% complete; materials are added at the end of the process.
4. Units in process at the end of August are 80% complete; materials are added at the halfway point.
Question: Department 4 has completed production on units that have a total cost of $15,000. The units are ready for sale. Give the journal entry.
Question: What types of companies use process costing systems?
Bergeron鈥檚 Exteriors produces exterior siding for homes. The Preparation Department begins with wood, which is chopped into small bits. At the end of the process, an adhesive is added. Then the wood/adhesive mixture goes on to the Compression Department, where the wood is compressed into sheets. Conversion costs are added evenly throughout the preparation process. January data for the Preparation Department are as follows:
UNITS | |
Beginning work-in-process inventory | 0 sheets |
Started in production | 3,900 sheets |
Completed and transferred out to compression in January | 2,700 sheets |
Ending work-in-process inventory (25% of the way through the preparation process) | 1,200 sheets |
COSTS | |
Beginning work-in-process inventory | \(0 |
Costs added during January | |
Wood | 3,120 |
Adhesive | 1,836 |
Direct labor | 990 |
Manufacturing overhead allocated | 2,100 |
Total costs | \)8,046 |
Requirements
1. Prepare a production cost report for the Preparation Department for January. The company uses the weighted-average method. (Hint: Each direct material added at a different point in the production process requires its own equivalent unit of production computation.)
2. Prepare the journal entry to record the cost of the sheets completed and
transferred out to the Compression Department.
3. Post the journal entries to the Work-in-Process Inventory鈥擯reparation T-account. What is the ending balance?
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