Question

Muskogee Company uses a process-costing system. The company manufactures a product that is processed in two departments: Molding and Assembly. In the Molding Department, direct materials are added at the beginning of the process; in the Assembly Department, additional direct materials are added at the end of the process. In both departments, conversion costs are incurred uniformly throughout the process. As work is completed, it is transferred out. The following table summarizes the production activity and costs for February.

                                                                      Molding                    Assembly

Beginning inventory

            Physical units                                       10,000                           8,000

            Costs:

                        Transferred in                                 ---                       $45,200

                        DM                                         $22,000                                ---

                        Conversion                             $13,800                       $16,800

Current production

            Units started                                         25,000                                  ?

            Units transferred out                            30,000                         35,000

            Costs:

                        Transferred in                                 ---                                  ?

                        DM                                         $56,250                       $39,550

                        Conversion                           $103,500                     $136,500

            Percentage of completion

                        Beginning inventory                    40%                             50%

                        Ending inventory                            80                                50

Required

1. Using the weighted average method, prepare two production reports: one for the Molding Department and one for the Assembly Department.
2. Using the FIFO method, prepare two production reports: one for the Molding Department and one for the Assembly Department.

Answer 1

Answer :

1.     Molding Department

        a.   Physical flow schedule:

              Units, beginning work in process.........................................                                      10,000

              Units started in February......................................................                                      25,000

              Total units to account for.....................................................                                      35,000

              Units completed and transferred out:

                  Started and completed.....................................................                                      20,000

                  From beginning work in process......................................                                      10,000

              Units, ending work in process..............................................                                        5,000

              Total units accounted for.....................................................                                      35,000

        b.   Equivalent units calculation:

                                                                                                                   Direct         Conversion

                                                                                                                Materials            Costs      

              Units completed...................................................................        30,000             30,000

              Add: Equivalent units in ending work in process                          5,000               4,000

              Total equivalent units...........................................................        35,000             34,000

        c.   Unit cost computation:

              Costs charged to the department:

                                                                                            Direct         Conversion

                                                                                          Materials            Costs                  Total  

              Costs in beginning work in process..............         $22,000        $    13,800           $    35,800

              Costs added by department.........................           56,250            103,500               159,750

              Total costs....................................................          $78,250         $117,300            $195,550

              Unit cost     = Unit direct materials cost + Unit conversion costs

                                 = $78,250/35,000 + $117,300/34,000

                                 = $2.2357* + $3.45

                                 = $5.6857

              *Rounded.

        d. and e.

              Total costs accounted for:

              Cost of goods transferred out (30,000 × $5.6857).................                               $170,571

              Costs in ending work in process:

                  Direct materials (5,000 × $2.2357).....................................      $    11,179*

                  Conversion costs (4,000 × $3.45).......................................            13,800

              Total costs in ending work in process.....................................                                    24,979

              Total costs accounted for........................................................                               $195,550

              *Rounded.

              Costs to account for:

              Beginning work in process......................................................      $    35,800

              Costs incurred.........................................................................          159,750

              Total costs to account for........................................................                               $195,550

2.     Journal entries:

        Work in Process—Molding...........................................              56,250

                Materials Inventory................................................                                      56,250

        Work in Process—Molding...........................................            103,500

                Conversion Costs—Control..................................                                    103,500*

        Work in Process—Assembly.........................................            170,571

                Work in Process—Molding...................................                                    170,571

        *Conversion costs are not broken into direct labor and overhead components. Thus, a controlling account for conversion costs is used. This reflects the practice of some firms, which are now combining overhead and direct labor costs into one category (often because direct labor is a small percentage of total manufacturing costs).

3.     Assembly Department

        a.   Physical flow schedule:

              Units, beginning work in process.........................................                                        8,000

              Units started in February (transferred in).............................                                      30,000

              Total units to account for.....................................................                                      38,000

              Units completed and transferred out:

                  Started and completed.....................................................                                      27,000

                  From beginning work in process......................................                                        8,000

              Units, ending work in process..............................................                                        3,000

              Total units accounted for.....................................................                                      38,000

        b.   Equivalent units calculation:

                                                                                           Direct         Conversion    Transferred

                                                                                        Materials            Costs                  In         

              Units completed...........................................        35,000             35,000             35,000

              Add: Equivalent units in ending

                  work in process........................................                 0               1,500               3,000

              Total equivalent units...................................        35,000             36,500             38,000

        c.   Unit cost calculation:

              Costs charged to the department:

                                                                       Direct         Conversion    Transferred

                                                                     Materials            Costs                  In                   Total  

              Costs in beginning work

                in process..............................        $           0        $    16,800        $    45,200       $    62,000

              Costs added............................           39,550            136,500            170,571            346,621

              Total costs...............................         $39,550         $153,300         $215,771         $408,621

        Unit cost    = Unit direct materials cost + Unit conversion costs +

                               Unit transferred-in cost

                           = $39,550/35,000 + $153,300/36,500 + $215,771/38,000

                           = $1.13 + $4.20 + $5.6782*

                           = $11.0082

        *Rounded.

        d. and e.

              Total costs accounted for:

              Units transferred out (35,000 × $11.0082)..........................                                  $385,287

              Costs in ending work in process:

                  Direct materials................................................................          $           0

                  Conversion costs (1,500 × $4.20)....................................                6,300

                  Transferred in (3,000 × $5.6782).....................................              17,035*

              Total costs in ending work in process..................................                                       23,335

              Total costs accounted for.....................................................                                  $408,622*

              *Rounded.

              Costs to account for:

              Beginning work in process...................................................                                $    62,000

              Costs incurred......................................................................                                     346,621

              Total costs to account for.....................................................                                  $408,621*

              *Difference due to rounding.

              Journal entries:

                Work in Process—Assembly.................................              39,550

                        Materials Inventory........................................                                      39,550

                Work in Process—Assembly.................................            136,500

                        Conversion Costs—Control..........................                                    136,500*

                Finished Goods......................................................            385,287

                        Work in Process—Assembly.........................                                    385,287

                *Conversion costs are not broken into direct labor and overhead components. Thus, a controlling account for conversion costs is used. This reflects the practice of some firms, which are now combining overhead and direct labor costs into one category (often because direct labor is a small percentage of total manufacturing costs).