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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

Sea Worthy uses three processes to manufacture lifts for personal watercrafts: forming a lift鈥檚 parts from galvanized steel, assembling the lift, and testing the completed lift. The lifts are transferred to finished goods before shipment to marinas across the country. Sea Worthy鈥檚 Testing Department requires no direct materials. Conversion costs are incurred evenly throughout the testing process. Other information follows for October 2018:

UNITS

Beginning work-in-process inventory

2,300 units

Transferred in from assembling department during the period

6,800 units

Completed during the period

4,100 units

Ending work in process inventory (40% complete for conversion work)

5,000 units

COSTS

Beginning work in process inventory (transferred in costs, \(93,400, conversion costs, \)18,100)

$111,500

Transferred in from the assembly department during the period

671,000

Conversion cost added during the period

49,000

The cost transferred into Finished Goods Inventory is the cost of the lifts transferred out of the Testing Department. Sea Worthy uses weighted-average process costing.

Requirements

1. Prepare a production cost report for the Testing Department.

2. What is the cost per unit for lifts completed and transferred out to Finished Goods Inventory? Why would management be interested in this cost?

Question: Explain the terms to account for and accounted for.

Question: The Finishing Department of Lee and Lewis, Inc., the last department in the manufacturing process, incurred production costs of \(220,000 during the month of June.If the June 1 balance in Work-in-Process Inventory鈥擣inishing is \)0 and the June 30balance is $70,000, what amount was transferred to Finished Goods Inventory?

For each of the following products or services, indicate if the cost would most likely be determined using a job order costing system or a process costing system.

a. Soft drinks

b. Automobile repairs

c. Customized furniture

d. Aluminum foil

e. Lawn chairs

f. Chocolate candy bars

g. Hospital surgery

h. Pencils

Shea Winery in Pleasant Valley, New York, has two departments: Fermenting and Packaging. Direct materials are added at the beginning of the fermenting process (grapes) and at the end of the packaging process (bottles). Conversion costs are added evenly throughout each process. The company uses the weighted-average method. Data from the month of March for the Fermenting Department are as follows:

Gallons

Beginning work-in-process inventory

500 gallons

Started in production

8,600 gallon

Completed and transferred out to packaging in march

7,900 gallon

Ending work-in-process inventory (80% of the way through the blending process)

1,200 gallon

Costs

Beginning work-in-process inventory

  • Direct materials

\(540

  • Direct labor

195

  • Manufacturing overhead allocated

210

Cost added during march

  • Direct materials

9,288

  • Direct labor

3,305

  • Manufacturing overhead allocated

3,378

Total cost added during march

\)15,971

Requirements

1. Compute the Fermenting Department鈥檚 equivalent units of production for direct

materials and for conversion costs.

2. Compute the total costs of the units (gallons)

a. completed and transferred out to the Packaging Department.

b. in the Fermenting Department ending Work-in-Process Inventory.
See all solutions

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