Question

Intrepid Industries manufactures sterile parts used in medical equipment. The company uses the weighted-average process costing method to account for production costs. It produces parts in three different departments: Forming, Sterilization, and Assembling. The following information was reported for the Assembling Department for the month of June: Beginning work-in-progress inventory on June 1 had 250,000 units made up of the following: Amount Degree of Completion Prior department costs transferred in from the Forming Department $387,600 100% Costs added by the Sterilization Department: Direct materials 317,200 100% Direct labor 120,050 40% Manufacturing overhead 67,100 30% $504,350 Work in process, June 1 $891,950 During June, 580,000 units were transferred in from the Forming Department at a cost of $1,870,000. The Assembling Department added the following costs: Direct materials $974,800 Direct labor 318,600 Manufacturing overhead 202,000 Total costs added $1,495,400 Assembling finished 480,000 units and transferred them to the Sterilization Department. At June 30, the number of units in ending work-in-progress inventory was 350,000. The degree of completion of work-in-process inventory at June 30 was as indicated below: Direct materials 80% Direct labor 65 Manufacturing overhead 30.

A. Prepare a correctly formatted (including heading) production cost report (see Exhibit 8.11 as a example report) using the weighted-average method.

B. Management wants to lower the costs of manufacturing the parts. It has established the following per unit targets for this product in the Assembling Department: materials, $1.65; labor, $.62; and manufacturing overhead $0.48. Has the product achieved management’s cost targets in the Assembling Department? Write a short report to management containing your answer(s).

Part II CU F Exhibit 8.11 Production Cost Report Production Cost Report: Weighted Average Process Costing B C D E TORRANCE TAPE, INC. Compounding Department For the Month Ending March 31 (Section 2) Equivalent Units Conversion (Section 1) Physical Units Materials Costs Costs T- 20,000 10 Flow of Units 11 Units to be accounted for: 12 In work-in-process beginning inventory 13 Units started this period 14 Total units to account for 92,000 112,000 16 Units accounted for: 17 Completed and transferred out 18 In work-in-process ending inventory 19 Total units accounted for 96,000 16,000 112,000 96,000 16,000 112,000 96,000 4,800 100,800 Costs (Sections 3 through 5 ) Materials Costs Conversion Costs Total $ 24,286 298,274 $ 322,560 $ 16,160 84,640 900,800 $ 8,1261 213,634 $ 221,760 0.90 $ 2.200 26 Flow of Costs 27 Costs to be accounted for (Section 3): 28 Costs in work-in-process beginning inventory 29 Current period costs 30 Total costs to be accounted for 31 32 Costs per equivalent unit (Section 4) 33 34 Costs accounted for (Section 5): 35 Costs assigned to transferred-out units 36 Costs assigned to work-in-process ending inventory 37 Total costs accounted for 38 $ 211,200 $ 297,600 24,960 $322,560 $ 86,400 14,4009 $ 100,800 10,560 $ 221,760 a 100% complete with respect to materials. b 30% complete with respect to conversion. • $0.90 = $100,800 - 112,000 equivalent units (EU) d $2.20 = $221,760 - 100,800 EU $86,400 = 96,000 EUⓇ $0.90 per EU + $211,200 = 96,000 EU x $2.20 per EU 9 $14,400 = 16,000 EU X $0.90 per EU $10,560 = 4,800 EU X $2.20 per EU Moronoihin

Answer 1

Statement showing calculation of no. of units completed and transferred out:

Beginning WIP	2,50,000
Add: Units transferred-in	5,80,000
Total units available for production	8,30,000
Less: No. of units in Ending WIP	2,25,000
No. of units completed and transferred out	6,05,000

	Transferred-in	Materials	Direct labor	Direct overhead
Units completed and transferred out	4,80,000	4,80,000	4,80,000	4,80,000
Add: Units in Ending WIP	2,25,000	2,25,000	2,25,000	2,25,000
%age completion	100%	80%	65%	30%
Equivalent units in Ending WIP	2,25,000	1,80,000	1,46,250	67,500
Total equivalent units in production	7,05,000	6,60,000	6,26,250	5,47,500

Production cost report:

Particulars	Transferred-in	Materials	Direct labor	Direct overhead	Total
Cost of beginning work in process	$387,600	$317,200	$120,050	$67,100	$891,950
Costs added during the period:	$0	$974,800	$318,600	$202,000	$1,495,400
Total cost to be accounted for:	$387,600	$1,292,000	$438,650	$269,100	$2,387,350
Equivalent units	7,05,000	6,60,000	6,26,250	5,47,500
Cost per equivalent unit	$0.55	$1.96	$0.70	$0.49
Ending WIP	2,25,000	2,25,000	2,25,000	2,25,000
%age completion	100%	80%	65%	30%
Equivalent units in ending WIP	2,25,000	1,80,000	1,46,250	67,500
Cost in ending WIP (no. of equivalent units in ending WIP * cost per equivalent unit)	$123,702	$352,364	$102,439	$33,177	$611,681.70
Units completed and transferred out	4,80,000	4,80,000	4,80,000	4,80,000
Cost of units completed and transferred out (units completed and transferred out * cost per equivalent unit)	$263,898	$939,636	$336,211	$235,923	$1,775,668.30
Total cost accounted for:	$387,600	$1,292,000	$438,650	$269,100	$2,387,350

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