Comprehensive Example

To provide a complete illustration of the FIFO method, we will use the data for the Mixing Department at Kellogg Company for the month of June, as shown in Illustration 3A-3 (page 116). COMPUTE THE PHYSICAL UNIT FLOW (STEP 1) Illustration 3A-4 (page 116) shows the physical flow of units for Kellogg Company for the month of June for the Mixing Department. Under the FIFO method, the physical units schedule is often expanded (as shown in Illustration 3A-5, page 116) to explain the transferred-out...

Managerial Analysis

BYP 3-2 Harris Furniture Company manufactures living room furniture through two departments Framing and Upholstering. Materials are entered at the beginning of each process. Costs transferred in should be treated as materials cost. For May, the following (a) If 3,000 sofas were started into production on May 1 and 2,500 sofas were transferred to Upholstering, what was the unit cost of materials for May in the Framing Department (b) Using the data in (a), what was the per unit conversion cost of...

Group Decision Case

BYP 3-1 British Beach Company manufactures suntan lotion, called Surtan, which sold in 11-ounce plastic bottles. Surtan is sold in a competitive market. As a result, management is very cost-conscious. Surtan is manufactured through two processes mixing and filling. Materials are entered at the beginning of each process, and labor and manufacturing overhead occur uniformly throughout each process. Unit costs are based on the cost per gallon of Surtan using the weighted-average costing approach....

Problems Set B

P3-1B Pepi Company manufactures its product, Vitadrink, through two manufacturing processes Mixing and Packaging. All materials are entered at the beginning of each process. On October 1, 2005, inventories consisted of Raw Materials 26,000, Work in Process Mixing 0, Work in Process Packaging 250,000, and Finished Goods 89,000. The beginning inventory for Packaging consisted of 10,000 units that were 50 complete as to conversion costs and fully complete as to materials. During October, 50,000...

Brief Exercises

BE3-1 Turner Manufacturing purchases 60,000 of raw materials on account, and it incurs 40,000 of factory labor costs. Journalize the two transactions on May 31 assuming the labor costs are not paid until June. BE3-2 Data for Turner Manufacturing are given in BE3-1. Supporting records show that a the Assembly Department used 29,000 of raw materials and 28,000 of the factory labor, and b the Finishing Department used the remainder. Journalize the assignment of the costs to the processing...

Ixercigeg

Journalize transactions for two processes. SO 4 Compute physical units and equivalent units of production. E3-1 Sally May Company manufactures pizza sauce through two production departments Cooking and Canning. In each process, materials and conversion costs are incurred evenly throughout the process. For the month of March, the work in process accounts show the following debits. E3-2 Greenleaf Manufacturing Company has two production departments Cutting and Assembly. August 1 inventories are...

Problems Set A

P3-1A Vargas Company manufactures a nutrient, Everlife, through two manufacturing processes Blending and Packaging. All materials are entered at the beginning of each process. On August 1, 2005, inventories consisted of Raw Materials 5,000, Work in Process Blending 0, Work in Process Packaging 3,945, and Finished Goods 7,500. The beginning inventory for Packaging consisted of 500 units, two-fifths complete as to conversion costs and fully complete as to materials. During August, 9,000 units...

SelfSt udy Questions

Answers are at the end of the chapter. SO 1 1. Which of the following items is not a characteristic of a process cost system a Once production begins, it continues until the finished product emerges. b The products produced are heterogeneous in nature. c The focus is on continually producing homogeneous products. d When the finished product emerges, all units have precisely the same amount of materials, labor, and overhead. SO 2 2. Indicate which of the following statements is not correct. a...

FIFO and Weighted Average

The weighted-average method of computing equivalent units has one major advantage It is simple to understand and apply. In cases where prices do not fluctuate significantly from period to period, the weighted-average method will be very similar to the FIFO method. In addition, companies that have been using just-in-time procedures effectively for inventory control purposes will have minimal inventory balances, and therefore differences between the weighted-average and the FIFO methods will not...

Em

Karlene Industries produces plastic ice cube trays in two processes heating and stamping. All materials are added at the beginning of the Heating Department. Karlene uses the weighted-average method to compute equivalent units. On November 1, 1,000 trays that were 70 complete were in process in the Heating Department. During November 12,000 trays were started into production. On November 30, 2005, 2,000 trays that were 60 complete were in process. The following cost information for the Heating...

Equivalent Units Under FIFO

Under the FIFO method, the computation of equivalent units is done on a firstin, first-out basis. Some companies favor the FIFO method because the FIFO cost assumption usually corresponds to the actual physical flow of the goods. Under the FIFO method, it is assumed therefore that the beginning work in process is completed before new work is started. Using the FIFO method, equivalent units are the sum of the work performed 1. Finish the units of beginning work in process inventory. 2. Complete...

Using the Decision Toolkit

Essence Company manufactures a high-end after-shave lotion, called Eternity, which is sold in 10-ounce shaped glass bottles. Because the market for after-shave lotion is highly competitive, the company is very concerned about keeping its costs under control. Eternity is manufactured through three processes mixing, filling, and corking. Materials are added at the beginning of the process, and labor and overhead are incurred uniformly throughout each process. The company uses a weighted-average...

Business Insight Management Perspective

In one of Caterpillar's automated cost centers, work is fed into the cost center, processed by robotic machines, and transferred to the next cost center without human intervention. One person tends all of the machines and spends more time maintaining machines than operating them. In such cases, overhead rates based on direct labor hours may be misleading. Surprisingly, some companies continue to assign manufacturing overhead on the basis of direct labor despite the fact that there is no...

Decision toolkit

What is the cost of a product Costs of materials, labor, and overhead assigned to processes used to make the product Compare costs to previous periods, to competitors, and to expected selling price to evaluate overall profitability. 1. How do physical units differ from equivalent units of production 2. What are the formulas for computing unit costs of production 3. How are costs assigned to units transferred out and in process 4. What are the four steps in preparing a production cost report In...

Comprehensive Example of Process Costing

Assumed data for the Mixing Department at Kellogg Company for the month of June are shown in Illustration 3-13. We will use this information to complete a production cost report for the Mixing Department. Illustration 3-13 Unit and cost data Mixing Department Units started into production during June Units completed and transferred out to Baking Department Costs incurred during production in June COMPUTE THE PHYSICAL UNIT FLOW STEP 1 Physical units are the actual units to be accounted for...

Equivalent Units

Suppose you were asked to compute the cost of instruction per full-time equivalent student at your college. You are provided the following information. Illustration 3-6 Information for full-time student example Illustration 3-6 Information for full-time student example Part-time students take 60 percent of the classes of a full-time student during the year. To compute the number of full-time equivalent students per year, you would make the following computation. Equivalent Units of Part-time...

The Nature of Process Cost Systems

Production Process Coca Cola

Process cost systems are used to apply costs to similar products that are mass-produced in a continuous fashion. Ben amp Jerry's uses a process cost system Production of the ice cream, once it begins, continues until the ice cream emerges, and the processing is the same for the entire run with precisely the same amount of materials, labor, and overhead. Each finished pint of ice cream is indistinguishable from another. A company such as USX uses process costing in the manufacturing of steel....

Process Cost Accounting

1 Understand who uses process cost systems. 2 Explain the similarities and differences between job order cost and process cost systems. 3 Explain the flow of costs in a process cost system. 4 Make the journal entries to assign manufacturing costs in a process cost system. 6 Explain the four steps necessary to prepare a production cost report. 7 Prepare a production cost report. Ben amp Jerry's Tracks Its Mix-Ups Read text and answer Before You Go On Review Summary of Study Objectives At one...