232147452 Exercises and Problems PDF

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EXERCISES AND PROBLEMS The Zygon Corporation was recently formed to produce a semiconductor chip that forms an essential part of the personal computer manufactured by a major corporation. The direct materials are added at the start of the production process while conversion costs are added uniformly...

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EXERCISES AND PROBLEMS 85.

The Zygon Corporation was recently formed to produce a semiconductor chip that forms an essential part of the personal computer manufactured by a major corporation. The direct materials are added at the start of the production process while conversion costs are added uniformly throughout the production process. June is Zygon's first month of operations, and therefore, there was no beginning inventory. Direct materials cost for the month totaled $895,000, while conversion costs equaled $4,225,000. Accounting records indicate that 475,000 chips were started in June and 425,000 chips were completed. Ending inventory was 50% complete as to conversion costs. Required: a. What is the total manufacturing cost per chip for June? b. Allocate the total costs between the completed chips and the chips in ending inventory. Answer: a.

Cost to account for Divided by equiv units Cost per equivalent units

Direct Materials $895,000 475,000 $1.88

Conversion Costs $4,225,000 450,000 $9.39

Total $5,120,000 $11.27

Equivalent unit for conversion costs = 425,000 completed + (50,000 x 0.5 completed) = 425,000 + 25,000 = 450,000 b.

Completed units = $11.27 x 425,000 = $4,789,750 Ending work in process = Direct materials = 50,000 x $1.88 = Conversion costs = 25,000 x $9.39 = Total

Difficulty: Terms to Learn:

2 Objective: 2 process-costing system, equivalent units

17-1

$ 94,000 234,750 $328,750

86.

Cedar Rapids Chemical placed 220,000 liters of direct materials into the mixing process. At the end of the month, 10,000 liters were still in process, 30% converted as to labor and factory overhead. All direct materials are placed in mixing at the beginning of the process and conversion costs occur evenly during the process. Cedar Rapids Chemical uses weighted-average costing. Required: a. Determine the equivalent units in process for direct materials and conversion costs, assuming there was no beginning inventory. b.

Determine the equivalent units in process for direct materials and conversion costs, assuming that 12,000 liters of chemicals were 40% complete prior to the addition of the 220,000 liters.

Answer: a. Direct materials: Beginning inventory Units started Equivalent units

0 liters 220,000 liters 220,000 liters

Conversion costs: Beginning inventory Units started To account for Units transferred out Ending inventory

0 liters 220,000 liters 220,000 liters 210,000 liters 10,000 liters

Units transferred out Ending inventory, 30% complete Equivalent units b.

210,000 liters 3,000 liters 213,000 liters

Direct materials: Completed and transferred out (210,000 + 12,000) Ending inventory, 100% complete Equivalent units

222,000 liters 10,000 liters 232,000 liters

Conversion costs: Completed and transferred out Ending inventory, 30% complete Equivalent units

222,000 liters 3,000 liters 225,000 liters

Difficulty: Terms to Learn:

2 Objective: 5 weighted-average process-costing method, equivalent units

17-2

87.

Jordana Woolens is a manufacturer of wool cloth. The information for March is as follows: Beginning work in process Units started Units completed

10,000 units 20,000 units 25,000 units

Beginning work-in-process direct materials Beginning work-in-process conversion Direct materials added during month Direct manufacturing labor during month Factory overhead

$ 6,000 $ 2,600 $30,000 $12,000 $ 5,000

Beginning work in process was half converted as to labor and overhead. Direct materials are added at the beginning of the process. All conversion costs are incurred evenly throughout the process. Ending work in process was 60% complete. Required: Prepare a production cost worksheet using the weighted-average method. Include any necessary supporting schedules. Answer: PRODUCTION COST WORKSHEET Flow of production Work in process, beginning Started during period To account for

Physical Units 10,000 20,000 30,000

Units completed Work in process, ending Accounted for

Costs Work in process, beginning Costs added during period Total costs to account for Divided by equivalent units Equivalent unit costs

Direct Materials

Conversion

25,000 5,000 30,000

25,000 5,000 30,000

25,000 3,000 28,000

Totals $ 8,600 47,000 $55,600

Direct Materials $ 6,000 30,000 $36,000 30,000 $ 1.20

Conversion $ 2,600 17,000 $19,600 28,000 $ 0.70

$

17-3

1.90

87.

(continued) Assignment of costs Costs transferred out (25,000 x $1.90) Work in process, ending Direct materials (5,000 x $1.20) Conversion (5,000 x $0.70 x 0.60) Costs accounted for

Difficulty: Terms to Learn: 88.

$47,500 6,000 2,100 $55,600

3 Objective: 5 weighted-average process-costing method, equivalent units

Four Seasons Company makes snow blowers. Materials are added at the beginning of the process and conversion costs are uniformly incurred. At the beginning of September, work in process is 40% complete and at the end of the month it is 60% complete. Other data for the month include: Beginning work-in-process inventory Units started Units placed in finished goods Conversion costs Cost of direct materials Beginning work-in-process costs: Materials Conversion

1,600 units 2,000 units 3,200 units $200,000 $260,000 $154,000 $ 82,080

Required: a. Prepare a production cost worksheet with supporting schedules using the weighted-average method of process costing. b. Prepare journal entries to record transferring of materials to processing and from processing to finished goods.

17-4

Answer: a.

PRODUCTION COST WORKSHEET

Flow of Production Work in process, beginning Started during period To account for

Physical Units 1,600 2,000 3,600

Units completed Work in process, ending Accounted for

Costs Work in process, beginning Costs added during period Total costs to account for Divided by equivalent units Equivalent-unit costs

3,200 400 3,600

Totals $236,080 460,000 $696,080 $197

Assignment of costs Completed units (3,200 x $197) Work in process, ending Direct materials (400 x $115) Conversion (400 x $82 x 0.60) Costs accounted for

Direct Materials

Conversion

3,200 400 3,600

3,200 240 3,440

Direct Materials $154,000 260,000 $414,000 3,600 $ 115

Conversion $ 82,080 200,000 $282,080 3,440 $ 82

$630,400 $46,000 19,680

65,680 $696,080

b. Work in Process Materials Inventory Finished Goods Work in Process

Difficulty: Terms to Learn:

260,000 260,000 630,400 630,400

3 Objective: 4, 5 weighted-average process-costing method, equivalent units

17-5

89.

Surf Products Company uses an automated process to clean and polish its souvenir items. For March, the company had the following activities: Beginning work in process inventory Units placed in production Units completed Ending work in process inventory

3,000 items, 1/3 complete 12,000 units 9,000 units 6,000 items, 1/2 complete

Cost of beginning work in process Direct material costs, current Conversion costs, current

$2,500 $9,000 $7,700

Direct materials are placed into production at the beginning of the process and conversion costs are incurred evenly throughout the process. Required: Prepare a production cost worksheet using the FIFO method. Answer: PRODUCTION COST WORKSHEET Flow of production Work in process, beginning Started during period To account for

Physical Units 3,000 12,000 15,000

Units Completed: Work in process, beginning Started and completed Work in process, ending

Costs Work in process, beginning Costs added during period Total costs to account for Divided by equivalent units Equivalent-unit costs

3,000 6,000 6,000 15,000

Totals $ 2,500 16,700 $19,200 $1.45

17-6

Direct Materials

6,000 6,000 12,000

Direct Materials $ 9,000 $ 9,000 12,000 $ 0.75

Conversion

2,000 6,000 3,000 11,000

Conversion $ 7,700 $ 7,700 11,000 $ 0.70

89.

(continued) Assignment of costs Work in process, beginning Completion of beginning (2,000 x $0.70) Total beginning inventory Started and Completed (6,000 x $1.45) Total costs transferred out Work in process, ending Direct materials (6,000 x $0.75) Conversion (6,000 x $0.70 x 0.50) Costs accounted for

Difficulty: Terms to Learn: 90.

$ 2,500 1,400 3,900 8,700 $12,600 $4,500 2,100

6,600 $19,200

3 Objective: 6 first-in, first-out (FIFO) process-costing method, equivalent units

The Laramie Factory produces expensive boots. It has two departments that process all the items. During January, the beginning work in process in the tanning department was 40% complete as to conversion and 100% complete as to direct materials. The beginning inventory included $6,000 for materials and $18,000 for conversion costs. Ending work-in-process inventory in the tanning department was 40% complete. Direct materials are added at the beginning of the process. Beginning work in process in the finishing department was 60% complete as to conversion. Beginning inventories included $7,000 for transferred-in costs and $10,000 for conversion costs. Ending inventory was 30% complete. Additional information about the two departments follows:

Beginning work-in-process units Units started this period Units transferred this period Ending work-in-process units Material costs added Conversion costs Transferred-out cost

Tanning 5,000 14,000 16,000 ?

Finishing 4,000 ? 18,000 2,000

$18,000 32,000 50,000

? $19,000 ?

Required: Prepare a production cost worksheet using weighted-average costing for the finishing department.

17-7

Answer: Production Cost Worksheet Finishing Department Weighted-Average Method Flow of production Work in process, beginning Transferred in during period To account for

Physical Units 4,000 16,000 20,000

Conversion

Trans-In

18,000 2,000 20,000

18,000 600 18,600

18,000 2,000 20,000

Totals $17,000 69,000 $86,000

Conversion $10,000 19,000 $29,000 18,600 $ 1.56

Trans-in $ 7,000 50,000 $57,000 20,000 $ 2.85

Units transferred out Work in process, ending Accounted for

Costs Work in process, beginning Costs added during period Total costs to account for Divided by equivalent units Equivalent-unit costs

$

Assignment of costs Transferred out (18,000 x $4.41) Work in process, ending Transferred-in costs (2,000 x $2.85) Conversion (600 x $1.56) Costs accounted for

Difficulty: Terms to Learn:

4.41

$79,380 $5,700 936

6,636 $86,016

3 Objective: 8 weighted-average process-costing method, equivalent units

17-8

91.

Lexington Company produces baseball bats and cricket paddles. It has two departments that process all products. During July, the beginning work in process in the cutting department was half completed as to conversion, and complete as to direct materials. The beginning inventory included $40,000 for materials and $60,000 for conversion costs. Ending work-in-process inventory in the cutting department was 40% complete. Direct materials are added at the beginning of the process. Beginning work in process in the finishing department was 80% complete as to conversion. Direct materials for finishing the units are added near the end of the process. Beginning inventories included $24,000 for transferred-in costs and $28,000 for conversion costs. Ending inventory was 30% complete. Additional information about the two departments follows:

Beginning work-in-process units Units started this period Units transferred this period Ending work-in-process units Material costs added Conversion costs Transferred-out cost

Cutting 20,000 60,000 64,000

Finishing 24,000

$48,000 28,000 128,000

$34,000 68,500

68,000 20,000

Required: Prepare a production cost worksheet, using FIFO for the finishing department. Answer: Production Cost Worksheet Finishing Department FIFO Method Flow of Production Work in process, beginning Started during period To account for

Physical Units 24,000 64,000 88,000

Direct Materials

Conversion

Trans-In

Good units completed Beginning work in process Started and completed Ending work in process Accounted for

24,000 44,000 20,000 88,000

17-9

24,000 44,000 0 68,000

4,800 44,000 6,000 54,800

44,000 20,000 64,000

91.

(continued) Costs WIP, beginning Costs added during period Total costs to account for Divided by equivalent units Equivalent-unit costs

Totals $ 52,000 230,500 $282,500 $

3.75

Assignment of costs Work in process, beginning Completion of beginning: Direct Materials (24,000 x $0.50) Conversion (4,800 x $1.25) Total Beginning Inventory Started and Completed (44,000 x $3.75) Total costs transferred out Work in process ending: Transferred-in (20,000 x $2.00) Conversion (20,000 x $1.25 x 0.30) Costs accounted for Difficulty: Terms to Learn: 92.

DMaterials $34,000 $34,000 68,000 $ 0.50

Conversion

Trans-In

$68,500 $68,500 54,800 $ 1.25

$128,000 $128,000 64,000 $ 2.00

$ 52,000 $12,000 6,000

$40,000 7,500

18,000 70,000 165,000 235,000

47,500 $282,500

3 Objective: 8 first-in, first-out (FIFO) process-costing method, equivalent units

General Fabricators assembles its product in several departments. It has two departments that process all units. During October, the beginning work in process in the cutting department was half completed as to conversion, and complete as to direct materials. The beginning inventory included $12,000 for materials and $3,000 for conversion costs. Ending work-in-process inventory in the cutting department was 40% complete. Direct materials are added at the beginning of the process. Beginning work in process in the finishing department was 75% complete as to conversion. Direct materials are added at the end of the process. Beginning inventories included $16,000 for transferred-in costs and $20,000 for conversion costs. Ending inventory was 25% complete. Additional information about the two departments follows: Cutting 20,000 40,000 50,000 10,000 $48,000 $16,000 $ 8,000

Beginning work-in-process units Units started this period Units transferred this period Ending work-in-process units Material costs added Direct manufacturing labor Other conversion costs

17-10

Finishing 20,000 50,000 20,000 $28,000 $40,000 $24,000

Required: Prepare a production cost worksheet using weighted-average for the cutting department and FIFO for the finishing department. Answer: Production Cost Worksheet Cutting Department Weighted-Average Method Flow of Production Work in process, beginning Started during period To account for

Physical Units 20,000 40,000 60,000

Units transferred out Work in process, ending Accounted for

Costs Work in process, beginning Costs added during period Total costs to account for Divided by equivalent units Equivalent-unit costs

50,000 10,000 60,000

Totals $15,000 72,000 87,000 $

1.50

Direct Materials

Conversion

50,000 10,000 60,000

50,000 4,000 54,000

Direct Materials $12,000 48,000 60,000 60,000 $ 1.00

Conversion $ 3,000 24,000 27,000 54,000 $ 0.50

Assignment of costs Transferred out (50,000 x $1.50) Work in process, ending Direct materials (10,000 x $1.00) Conversion (10,000 x 0.40 x $0.50) Costs accounted for

$75,000 $10,000 2,000

17-11

12,000 $87,000

92.

(continued) Production Cost Worksheet Finishing Department FIFO Method

Work in process, beginning Started During Period To account for

Physical Units 20,000 50,000 70,000

Good Units Completed: Beginning Work in process Started and Completed Ending work in process Accounted for

20,000 30,000 20,000 70,000

Flow of Production

17-12

Direct Materials

20,000 30,000 0 50,000

Conversion

Trans-In

5,000 30,000 5,000 40,000

30,000 20,000 50,000

Totals

Costs Work in process, beginning Costs added during period Total Costs to account for Divided by equivalent units Equivalent-unit costs

$ 36,000 167,000 $203,000 $

3.66

Direct Materials $28,000 $28,000 50,000 $ 0.56

Conversion

Trans-In

$64,000 $64,000 40,000 $ 1.60

$75,000 $75,000 50,000 $ 1.50

Assignment of costs Work in process, beginning Completion of beginning: Direct Materials (20,000 x $0.56) Conversion (20,000 x 0.25 x $1.60) Total Beginning Inventory Started and Completed (30,000 x $3.66) Total costs transferred out Work in process ending Transferred-in (20,000 x $1.50) Conversion (20,000 x $1.60 x 0.25) Costs accounted for

Difficulty: Terms to Learn:

$ 36,000 $11,200 8,000

$30,000 8,000

19,200 55,200 109,800 165,000

38,000 $203,000

3 Objectives: 5-8 first-in, first-out (FIFO) process-costing method, equivalent units

17-13

EXERCISES AND PROBLEMS 138.

The president of the company, Gregory Peters, has come to you for help. Use the following data to prepare a flexible budget for possible sales/production levels of 10,000, 11,000, and 12,000 units. Show the contribution margin at each activity level. Sales price Variable costs: Manufacturing Administrative Selling Fixed costs: Manufacturing Administrative

17-14

$24 per unit $12 per unit $ 3 per unit $ 1 per unit $60,000 $20,000

Answer: Flexible Budget for Various Levels of Sales/Production Activity Units

10,000

11,000

12,000

Sales

$240,000

$264,000

$288,000

Variable costs: Manufacturing Administrative Selling

120,000 30,000 10,000

132,000 33,000 11,000

144,000 36,000 12,000

Total variable costs

160,000

176,000

192,000

Contribution margin

80,000

88,000

96,000

Fixed costs: Manufacturing Administrative

60,000 20,000

60,000 20,000

60,000 20,000

-0-

$ 8,000

$ 16,000

Operating income/(loss) Difficulty: Terms to Learn:

$

2 Objective: flexible budget

17-15

2

139.

Strauss Table Company manufactures tables for schools. The 20X5 operating budget is based on sales of 20,000 units at $100 per table. Operating income is anticipated to be ...