Question

JOB-ORDER COSTING AND PROCESS COSTING SYSTEMS 14.B2 Basic Process Costing Hassan Company produces digital watches in large quantities. The manufacturing costs of the assem- bly department were as follows: Direct materials added Conversion costs $1,750,000 Direct labor $550,000 37.500 Factory overhead 687.500 Assembly costs to account for $2,437,500 For simplicity, assume that this is a two-department company, assembly and finishing. There was no beginning work in process. Suppose 700,000 units were started in the assembly department. There were 400,000 units com- pleted and transferred to the finishing department. The 300,000 units in ending work in process were fully completed regarding direct materials but half-completed regarding conversion costs. 1. Compute the equivalent units and unit costs in the assembly department. 2. Compute the costs of units completed and transferred to the finishing department. Also compute the cost of the ending work in process in the assembly department. (For journal entries, see Exercise 14-35.) 14-B3 Weighted-Average Process-Costing Method The Rainbow Paint Company uses a process-costing system. Materials are added at the beginning of a particular process, and conversion costs are incurred uniformly. Work in process at the beginning of the month is 40% complete, while at the end it is 20% complete. One gallon of material makes one gallon of product. Data follow: Beginning inventory Direct materials added Ending inventory Conversion costs incurred Cost of direct materials added Conversion costs, beginning inventory Cost of direct materials, beginning inventory 600 gal 8,200 gal ,000 gal $25,800 $55,700 $ 2,200 $ 3,700 Use the weighted-average method. Prepare a schedule of output in equivalent units and a schedule of application of costs to products. Show the cost of goods completed and cost of ending work in process. (For joumal entries, see Exercise 14-37.) 14-B4 Backflush Costing Audio Components recently installed a backflush-costing system. One department makes 4-inch speakers with a standard cost as follows: $9.60 5.40 $15.00 Materials Conversion costs Speakers are scheduled for production only after orders are received, and products are shipped to customers immediately on completion. Therefore, no finished goods inventories are kept, and product costs are applied directly to cost of goods sold In October, 1.600 speakers were produced and shipped to customers. Materials were purchased at cost of $16,200, and actual conversion costs (labor plus manufacturing overhead) of $6,800 were recorded. 1. Prepare journal entries to record October's costs for the production of 4-inch speakers. 2. Suppose October's actual conversion costs had been $6,000 instead of $6,800. Prepare a journal entry to recognize overapplied conversion

Answer 1

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Step for solution
Step 1	Equivalent Units of production = Physical units multiplied by % of the competition
Step 2	Calculate total cost to be accounted for
Step 3	Cost per Equivalent Unit = total cost to be accounted for / Equivalent Units of production
Step 4	Cost assigned to units transferred out = units completed and transferred out * Cost per Equivalent Unit
Step 5	Cost assigned to units ending work in progress = equivalent units in ending WIP inventory * Cost per Equivalent Unit

Hassan Company
Assembly Department production Report
Weighted average Method
Period ended
Summary of Physical units
Units in beginning WIP inventory			0
Units started during month			700000
Total unit to be accounted for			700000
Units completed and transferred out			400000
Units in ending WIP inventory			300000
Total unit accounted for			700000
Equivalent Units of production
Particulars	Physical units	Direct material		Conversion Cost
		%	units	%	units
units in beginning WIP inventory	0		0		0
Units in Started and completed (400000-0)	400000	100%	400000	100%	400000
units in ending WIP inventory	300000	100%	300000	50%	150000
Equivalent Units of production			700,000		550,000
Summary of cost to be accounted
	Direct material	Conversion Cost	Total
Cost in beginning WIP			-
Cost incurred during Month (Add)	$        1,750,000	$         687,500	$   2,437,500
total cost to be accounted for	$        1,750,000	$         687,500	$   2,437,500
cost per Equivalent Unit
total cost to be accounted for	$        1,750,000	$         687,500
Divided by: Equivalent Units of production	700,000	550,000
Cost per Equivalent Unit	$                   2.50	$                1.25	$              3.75
Assign costs to units transferred out and units in ending WIP inventory
Cost assigned to units transferred to finished department
units completed and transferred out	400000	400000
Cost per Equivalent Unit	$                   2.50	$                1.25
Cost assigned to units transferred to finished department	$        1,000,000	$         500,000	$   1,500,000
Cost assigned to units ending work in progress
equivalent units in ending WIP inventory	300000	150000
Cost per Equivalent Unit	$                   2.50	$                1.25
Cost assigned to units ending work in progress	$            750,000	$         187,500	$       937,500
Total cost assigned			$   2,437,500

Hassan Company
Journal entries
Date	General Journal	debit	credit
1	Work in progress - Assembly Process	1,750,000
	Raw material inventory		1,750,000
	(To record direct material used in production process.)
2	Work in progress - Assembly Process	687,500
	Conversion Cost		687,500
	(To conversion cost applied to Work in progress - Assembly Process.)
3	Work in progress - Finished Process	1,500,000
	Work in progress - Assembly Process		1,500,000
	(To record cost of unit transferred to next process.)