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Chapter 18: Q.18-10RQ (page 1006)

Question: What are the four steps in preparing a production cost report?

Short Answer

Expert verified

Answer:

. The four steps procedure to prepare the production cost report includes:

1. Summarize the flow of physical units

2. Compute output in terms of equivalent units of production

3. Compute the cost per equivalent unit of production

4. Assign cost to units completed and units in process.

Step by step solution

01

Summarize the flow of physical units

The flow of physical units is classified as the First-in-first-out, last-in-first-out or weighted average. The company is required to summarize the flow of physical unit while determining the costing of material used in production.

02

Compute the output in terms of equivalent unit of production

The company should calculate the number of unit produced at the end of the manufacturing process to determine the per unit cost incurred by the company.

03

Compute the cost per equivalent unit of production

The cost per equivalent unit of production is identified by the management to decide over the selling price and the profit margin of the company.

04

Assign cost to units completed and units in process

Once the cost per unit is identified, the company assign this cost to the finished goods units and the work in process units.

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Most popular questions from this chapter

Question: Castillo Company has three departments: Mixing, Bottling, and Packaging. At the end of the month, the production cost reports for the departments show the costs of the products completed and transferred were \(75,000 from Mixing to Bottling, \)50,000 from Bottling to Packaging, and $65,000 from Packaging to Finished Goods Inventory. Prepare the journal entries for the transfer of the costs.

Miller Company sells several products. Sales reports show that the sales volume of its most popular product has increased the past three quarters while overall profits have decreased. How might production cost reports assist management in making decisions about this product?

Selected production and cost data of Laura鈥檚 Caliper Co. follow for May 2018:

Mixing Department

Heating department

Units to account for :

  • Beginning WIP, April 30

25,000

10,000

  • Started in May

90,000

  • Transferred in during May

90,000

Total units to account for

115,000

100,000

Units accounted for:

  • Completed and transferred out during may

90,000

82,000

  • Ending WIP, May 31

25,000

18,000

Total units accounted for

115,000

100,000

On May 31, the Mixing Department ending Work-in-Process Inventory was 80%

complete for materials and 45% complete for conversion costs. The Heating Department ending Work-in-Process Inventory was 60% complete for materials and 35% complete for conversion costs. The company uses the weighted-average method. Requirements

1. Compute the equivalent units of production for direct materials and for conversion costs for the Mixing Department.

2. Compute the equivalent units of production for transferred in costs, direct materials, and conversion costs for the Heating Department.

Casey Carpet manufactures broadloom carpet in seven processes: spinning, dyeing, plying, spooling, tufting, latexing, and shearing. In the Dyeing Department, direct materials (dye) are added at the beginning of the process. Conversion costs are incurred evenly throughout the process. Information for July 2018 follows:

UNITS

Beginning work-in-process inventory

75 rolls

Transferred in from spinning department during July

590 rolls

Completed during July

550 rolls

Ending work in process inventory (80% complete for conversion work)

115 rolls

COSTS

Beginning work in process inventory (transferred in costs, \(3,700, material costs, \)1,450 conversion costs, \(4,950)

\)10,100

Transferred in from the spinning department

21,570

Material costs added during July

11,185

Conversion costs added during July (Manufacturing wages, \(8,050; manufacturing overhead allocated, \)45,422)

53,472

Requirements

1. Prepare a production cost report for Casey鈥檚 Dyeing Department for July. The

company uses the weighted-average method.

2. Journalize all transactions affecting Casey鈥檚 Dyeing Department during July, including the entries that have already been posted. Assume labor costs are accrued and not yet paid.

Question: Spring Fresh produces premium bottled water. Spring Fresh purchases artesian water, stores the water in large tanks, and then runs the water through two processes: filtration and bottling.

During February, the filtration process incurred the following costs in processing

200,000 liters:

Wages of workers operating filtration equipment

$19,950

Manufacturing overhead allocated to filtration

20,050

Water

110,000

Spring Fresh had no beginning Work-in-Process Inventory in the Filtration Department in February and uses the weighted-average method.

Requirements

1. Compute the February conversion costs in the Filtration Department.

2. The Filtration Department completely processed 200,000 liters in February. What was the filtration cost per liter?
See all solutions

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