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Chapter 18: Q22E (page 1012)

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?

Short Answer

Expert verified

1.The journal entries to record the assignment of the direct material costing $5,525 and direct labor of $1,500, allocation of manufacturing overhead of $2,547 and the cost of completed and transferred out gallon i.e. $7,930 is done in step 2.

2. The ending balance of the work-in-process inventory account is $1,642

3. The average cost per gallon transferred out of the blending department into the packaging department is $1.22

The management of the company compute this cost to decide the selling price of the product after adding the profit margin.

Step by step solution

01

Step-by-Step Solution:Step 1: Costing system

A costing system is defined as the system used by the companies to determine the cost of goods manufactured during the year. It is classified as the process and job order costing systems.

02

Journal entries

Date

Particulars

Debit ($)

Credit ($)

Work-in-process inventory

5,525

Direct material

5,525

Work-in-process inventory

1,500

Wages payable

1,500

Work-in-process inventory

2,547

Manufacturing overhead

2,547

Finished goods inventory

7,930

Work-in-process inventory

7,930

03

Work-in-process inventory – Blending T-account

Particulars

Amount ($)

Particulars

Amount ($)

Beginning balance

0

Finished goods inventory

7,930

Direct material

5,525

Direct labor

1,500

Manufacturing overhead

2,547

Ending balance

1,642

04

Average cost per gallon transferred out of the blending department into the packaging department

Averagecostpergallon=TotalcostofthecompletedgoodsNumberofunits=$7,9306,500=$1.22鈥�

The manager of Shea Winery want to know this cost for deciding the selling price of the product. Selling price is derived at by adding the profit margin with the total cost of the products.

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Most popular questions from this chapter

Refer to the data and your answers from Exercise E18-23.

Requirements

1. Prepare the journal entries to record the assignment of direct materials and direct labor and the allocation of manufacturing overhead to the Fermenting Department. Assume labor costs are accrued and not yet paid. Also prepare the journal entry to record the cost of the gallons completed and transferred out to the Packaging Department.

2. Post the journal entries to the Work-in-Process Inventory鈥擣ermenting T-account. What is the ending balance?

3. What is the average cost per gallon transferred out of the Fermenting Department into the Packaging Department? Why would Shea Winery鈥檚 managers want to know this cost?

Describe ways the production cost report can be used by management.

Hartley Company has a production process that involves three processes. Units move through the processes in this order: cutting, stamping, and then polishing. The company had the following transactions in November:

1. Cost of units completed in the Cutting Department, \(17,000

2. Cost of units completed in the Stamping Department, \)30,000

3. Cost of units completed in the Polishing Department, \(35,000

4. Sales on account, \)50,000

5. Cost of goods sold is 80% of sales

Prepare the journal entries for Hartley Company.

Carla 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 November 2018 follows:

UNITS

Beginning work-in-process inventory

70 rolls

Transferred in from spinning department during November

550 rolls

Completed during November

480 rolls

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

140 rolls

COSTS

Beginning work in process inventory (transferred in costs, \(4,000, Materials costs, \)1,400 conversion costs, \(5,300)

\)10,700

Transferred in from the spinning department

23,280

Material costs added during November

14,100

Coversion cost added during November (manufacturing wages, \(8,725; manufacturing overhead allocated, \)43,991)

52,716

Requirements

1. Prepare the November production cost report for Carla鈥檚 Dyeing Department.

The company uses the weighted-average method.

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

Bishop Company uses the FIFO method in its process costing system. The Mixing Department started the month with 500 units in a process that was 20% complete, started in the production of 2,000 units, and transferred 2,100 units to the finished goods storage area. All materials are added at the beginning of the process, and conversion costs occur evenly. The units in process at the end of the month are 45% complete concerning conversion costs. The department incurred the following costs:

Beginning WIP

Added this month

Total

Direct materials

\(500

\)2,000

\(2,500

Conversion cost

1,250

5,450

6,700

Total

\)1,750

\(7,450

\)9,200

14A. How many units are still in process at the end of the month?

15A. Compute the equivalent production units for the Mixing Department for the current month.

16A. Determine the cost per equivalent unit for the current period for direct materials and conversion costs.

17A. Determine the cost to be transferred to the next department.
See all solutions

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