Accounting Question

Instructions:

Mirror Products manufactures mirrors and uses a standard process costing system.

The following production and cost data are based on June 2022. This information represents the standard cost of one unit:

Direct material

6.50SAR

Conversion

12.50SAR

Total manufacturing cost

19.00SAR

Beginning WIP

20,000 units (100% DM; 80% conversion)

Started in June

180,000 units

Completed in June

140,000 units

Ending WIP

??? (100%DM 60% conversion)

Actual costs for June:

Direct material

1,500,000SAR

Conversion

2,000,000SAR

Total actual cost

3,500,000SAR

1. Prepare an equivalent unit of production schedule.

2. Prepare a cost of production report and assign costs to goods transferred and to inventory.

3. Compute the direct material variance and conversion cost variance. Show all work. What is the total amount to be booked against the cost of goods sold?

4. Based on your analysis above, does this product appear to be a good source of income for the firm? Should it continue operations? Why or why not?

Chapter 2
Job Order
Costing
Learning Objectives
• Obj. 1: Describe cost accounting systems used
by manufacturing businesses.
• Obj. 2: Describe and illustrate a job order cost
accounting system for a manufacturing business.
• Obj. 3: Describe job order cost accounting
systems for service businesses.
• Obj. 4: Describe the use of job order cost
information for decision making.
© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Cost Accounting Systems Overview
(slide 1 of 4)
Measure, record, and
report product costs
Cost
accounting
systems
Job order cost
systems
Process cost
systems
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Cost Accounting Systems Overview
(slide 2 of 4)
Uses of product
costs
Setting product
prices
Controlling
operations
Developing
financial
statements
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Cost Accounting Systems Overview
(slide 3 of 4)
• A job order cost system provides product costs
for each quantity of product that is manufactured.
o Each quantity of product that is manufactured is called
a job.
• Job order cost systems are often used by
companies that manufacture custom products for
customers or batches of similar products.
o Manufacturers that use a job order cost system are
sometimes called job shops.
▪ Examples of job shops:
– Apparel manufacturer
– Guitar manufacturer
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Cost Accounting Systems Overview
(slide 4 of 4)
• A process cost system provides product costs
for each manufacturing department or process.
• Process cost systems are often used by
companies that manufacture units of a product
that are indistinguishable from each other and
are manufactured using a continuous
production process.
o Examples: oil refineries, paper producers, chemical
processers, food processors
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Summary of Legend Guitars’ Manufacturing
Operations
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Job Order Cost Systems for Manufacturing
Businesses (slide 1 of 2)
• A job order cost system records and summarizes
manufacturing costs by jobs.
o While jobs are still in the production process, they are
part of Work in Process Inventory.
o When jobs are completed, they become part of
Finished Goods Inventory.
o When the finished goods are sold to customers, their
costs become part of Cost of Goods Sold.
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Flow of Manufacturing Costs
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Job Order Cost Systems for Manufacturing
Businesses (slide 2 of 2)
• In a job order cost accounting system, perpetual
inventory controlling accounts and subsidiary
ledgers are maintained for materials, work in
process, and finished goods inventories.
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Inventory Ledger Accounts
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Materials
(slide 1 of 6)
• The materials account in the general ledger is a
controlling account. A separate account for each
type of material is maintained in a subsidiary
materials ledger.
Materials ledger account
Increases (debits) are
based on receiving reports,
which is supported by the
supplier’s invoice
Decreases (credits) are
based on materials
requisitions
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Materials Information and Cost Flows
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Materials
(slide 2 of 6)
• A receiving report is prepared when materials
that have been ordered are received and
inspected.
• The quantity received and the condition of the
materials are entered on the receiving report.
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Materials
(slide 3 of 6)
• When the supplier’s invoice is received, it is
compared to the receiving report.
• If there are no discrepancies, a journal entry is
made to record the purchase.
o The journal entry to record the supplier’s invoice
related to Receiving Report No. 196 (see Slide 12) is
as follows:
Materials
Accounts payable
10,500
10,500
Materials purchased during December
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Materials
(slide 4 of 6)
• The storeroom releases materials for use in
manufacturing when a materials requisition is
received.
• The materials requisitions for each job serve as
the basis for recording materials used.
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Materials
(slide 5 of 6)
• For direct materials, the quantities and amounts
from the materials requisitions are posted to job
cost sheets.
o Job cost sheets make up the work in process
subsidiary ledger.
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Materials
(slide 6 of 6)
• A summary of the materials requisitions is used
as a basis for the journal entry recording the
materials used for the month.
o For direct materials, this entry increases (debits) Work
in Process and decreases (credits) Materials.
▪ The journal entry to record the direct materials used for the
month for Legend Guitars (see Slide 12) is as follows:
Work in process
Materials
13,000
13,000
Materials requisitioned to jobs
($2,000 ÷ $11,000)
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Factory Labor
(slide 1 of 2)
• When employees report for work, they may use
electronic badges, clock cards, or in-and-out
cards to clock in.
• When employees work on an individual job,
they use time tickets to record the amount of
time they have worked on a specific job.
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Labor Information and Cost Flows
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Factory Labor
(slide 2 of 2)
• A summary of the time tickets is used as the
basis for the journal entry recording direct labor
for the month.
o This entry increases (debits) Work in Process and
increases (credits) Wages Payable.
▪ The journal entry to record direct labor for the month for
Legend Guitars (see Slide 20) is as follows:
Work in process
Wages payable
11,000
11,000
Factory labor used in production of
jobs ($3,500 ÷ $7,500)
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Factory Overhead
(slide 1 of 2)
• Factory overhead includes all manufacturing
costs except direct materials and direct labor.
• Factory overhead costs come from a variety of
sources, including the following:
o Indirect materials come from a summary of materials
requisitions.
o Indirect labor comes from the salaries of production
supervisors and the wages of other employees such
as janitors.
o Factory power comes from utility bills.
o Factory depreciation comes from Accounting
Department computations of depreciation.
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Factory Overhead
(slide 2 of 2)
• Assume that Legend Guitars incurred $4,600 of
overhead during December, which included $500 of
indirect materials, $2,000 of indirect labor, $900 of
utilities, and $1,200 of factory depreciation. The $500 of
indirect materials consisted of $200 of glue and $300 of
sandpaper. The entry to record the factory overhead is
as follows:
Factory overhead
Materials
4,600
500
Wages payable
2,000
Utilities payable
900
Accumulated depreciation
1,200
Factory overhead incurred in production
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Check Up Corner
Direct Materials, Direct Labor, and
Factory Overhead Costs
• Grayson Company is a manufacturer that uses a job order cost system.
The following data summarize the operations related to production for
January, the first month of operations:
a.
b.
Purchased 400 units of materials at $14 per unit on account.
Requisitioned materials for production as follows:
▪ 200 units for Job 101 at $12 per unit.
▪ 300 units for Job 102 at $14 per unit.
c.
Accumulated direct labor cost as follows:
▪ 700 hours of direct labor on Job 101 at $16 per hour.
▪ 600 hours of direct labor on Job 102 at $12 per hour.
d.
Incurred factory overhead costs as follows: indirect materials, $800; indirect
labor, $3,400; utilities cost, $1,600; and factory depreciation, $2,500.
• Journalize the entries to record these transactions.
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Check Up Corner
a.
Purchase of materials
Materials
5,600
Accounts payable
b.
400 units × $14 per unit
5,600
Requisition of materials
Work in process
6,600
Materials
c.
Direct Materials, Direct Labor, and
Factory Overhead Costs Solution
Work in process
6,600
18,400
Wages payable
d. Factory overhead
Materials
18,400
Qty.
Price
Total cost
Job 101
200 ×
$12 =
$2,400
Job 102
300 ×
$14 =
$4,200
Total
$6,600
Direct labor cost
8,300
Hours
800
Rate
Total cost
Wages payable
3,400
Job 101
700 ×
$16 =
$11,200
Utilities payable
1,600
Job 102
600 ×
$12 =
$7,200
Accumulated
depreciation—factory
2,500
Total
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$18,400
Allocating Factory Overhead
(slide 1 of 2)
• Factory overhead is different from direct labor
and direct materials in that it is indirectly
related to the jobs. That is, factory overhead
costs cannot be identified with or traced to
specific jobs. For this reason, factory
overhead costs are allocated to jobs.
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Allocating Factory Overhead
(slide 2 of 2)
• The process by which factory overhead or
other costs are assigned to a cost object, such
as a job, is called cost allocation.
o The factory overhead costs are allocated to jobs
using a common measure related to each job.
▪ This measure is called an activity base, allocation base,
or activity driver.
– Three common activity bases used to allocate factory
overhead costs are as follows:
1. Direct labor hours
2. Direct labor cost
3. Machine hours
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Predetermined Factory Overhead Rate
(slide 1 of 3)
• Factory overhead costs are normally allocated
or applied to jobs using a predetermined
factory overhead rate.
• The predetermined factory overhead rate is
computed as follows:
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Predetermined Factory Overhead Rate
(slide 2 of 3)
• Assume that Legend Guitars estimates the total
factory overhead cost as $50,000 for the year
and the activity base as 10,000 direct labor
hours. The predetermined factory overhead rate
is computed as follows:
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Predetermined Factory Overhead Rate
(slide 3 of 3)
Activity-based
costing
Method for
accumulating and
allocating factory
overhead costs
Uses a different
overhead rate for
each type of factory
overhead activity
Inspecting, moving,
and machining
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Applying Factory Overhead to Jobs
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Applying Factory Overhead to Work in Process
(slide 1 of 5)
• Using a factory overhead rate of $5 per direct
labor hour, $4,250 of factory overhead is applied
as follows:
Time tickets
Direct labor
hours
Factory overhead
rate
Factory overhead
applied
Job 71
350
$5
$1,750 (350 hrs. × $5)
Job 72
500
$5
$2,500 (500 hrs. × $5)
Total
850
$4,250
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Applying Factory Overhead to Work In Process
(slide 2 of 5)
• The journal entry to apply factory overhead
increases (debits) Work in Process and
decreases (credits) Factory Overhead.
o The journal entry to apply overhead to Jobs 71 and
72 is as follows:
Work in process
Factory overhead
4,250
4,250
Factory overhead applied to jobs
according to the predetermined overhead
rate (850 hrs. × $5)
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Applying Factory Overhead to Work in Process
(slide 3 of 5)
• The factory overhead account is:
o Increased (debited) for the actual overhead costs
incurred.
o Decreased (credited) for the applied overhead.
• The actual and applied overhead usually differ
because the actual overhead costs are normally
different from the estimated overhead costs.
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Applying Factory Overhead to Work in Process
(slide 4 of 5)
• Depending on whether actual overhead is greater or less
than applied overhead, the factory overhead account will
either have a debit or credit ending balance as follows:
o
If the applied overhead is less than the actual overhead incurred,
the factory overhead account will have a debit balance.
▪ This debit balance is called underapplied factory overhead or
underabsorbed factory overhead.
o
If the applied overhead is more than the actual overhead
incurred, the factory overhead account will have a credit balance.
▪ This debit balance is called overapplied factory overhead or
overabsorbed factory overhead.
© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Applying Factory Overhead to Work in Process
(slide 5 of 5)
• The factory overhead account for Legend Guitars, which
follows, illustrates both underapplied and overapplied
factory overhead.
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Check Up Corner
•
Applying Overhead and Determining Job
Cost
Grayson Company estimates that total factory overhead costs will be $100,000 for
the year. Direct labor hours are estimated as 25,000 for the year. The company
has two completed jobs at the end of January, Jobs 101 and 102. The direct labor
hours and units produced for these jobs are as follows:
a.
Direct labor hours
Units produced
Job 101
700
500
Job 102
600
1,000
Using the information provided, determine:
▪ The predetermined factory overhead rate using direct labor hours as the activity
base.
▪ The amount of factory overhead applied to Jobs 101 and 102 in January.
b.
c.
Prepare the journal entry to apply factory overhead to both jobs in January
using the predetermined overhead rate from (a).
Using the information provided along with the job cost information from
Check Up Corner 16-1, determine:
▪ The balance on the job cost sheets for Jobs 101 and 102 at the end of the month.
▪ The cost per unit for Jobs 101 and 102.
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Check Up Corner
Applying Overhead and
Determining Job Cost Solution (slide 1 of 2)
a. 1
2
Direct
labor
hours
Factory
overhead
rate
Factory
overhead
applied
Job 101
700 ×
$4
=
$2,800
Job 102
600 ×
$4
=
$2,400
Total
b.
$5,200
Work in process
Factory overhead
A predetermined
overhead rate is used to
apply overhead costs to
individual jobs.
The factory overhead cost
applied to each job is
recorded on the job cost
sheet for each job.
5,200
5,200
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Check Up Corner
Applying Overhead and
Determining Job Cost Solution (slide 2 of 2)
The factory overhead costs
applied are from Slide 38.
Job 101
Job 102
Direct materials
$2,400
$4,200
Direct labor
$11,200
$7,200
Factory overhead
$2,800
$2,400
Total costs
$16,400
$13,800
Cost per unit
$32.80
$13.80
$16,400 ÷ 500 units
$13,800 ÷ 1,000 units
The direct materials cost and
direct labor cost for each job
were determined in Check
Up Corner 16-1.
The total costs of each job
are accumulated on the job
cost sheet.
The total cost is divided by
the number of units to
determine the cost per unit.
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Disposal of Factory Overhead Balance
(slide 1 of 3)
• During the year, the balance in the factory
overhead account is carried forward and
reported as a deferred debit or credit on the
monthly (interim) balance sheets.
• However, any balance in the factory overhead
account should not be carried over to the next
year.
o This is because any such balance applies only to
operations of the current year.
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Disposal of Factory Overhead Balance
(slide 2 of 3)
• The balance of Factory Overhead at the end of the year is disposed
of by transferring it to the cost of goods sold account as follows:
o If there is an ending debit balance (underapplied overhead) in the factory
overhead account, it is disposed of by the entry that follows:
Cost of goods sold
XXX
Factory overhead
XXX
Transfer of underapplied overhead of cost
of goods sold
o If there is an ending credit balance (overapplied overhead) in the factory
overhead account, it is disposed of by the entry that follows:
Factory overhead
Cost of goods sold
XXX
XXX
Transfer of overapplied overhead of cost of
goods sold
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Disposal of Factory Overhead Balance
(slide 3 of 3)
• The journal entry to dispose of Legend Guitars’ December 31, 2018,
underapplied overhead balance of $150 is as follows:
Cost of goods sold
Factory overhead
150
150
Closed underapplied factory overhead to
cost of goods sold
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Work in Process
(slide 1 of 3)
Direct materials cost
Increased Work in Process
Direct labor cost
Applied factory overhead cost
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Job Cost Sheets and the Work
in Process Controlling Account
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Work in Process
(slide 2 of 3)
• During December, Job 71 was completed. Upon
completion, the product costs (direct materials, direct
labor, and factory overhead) are totaled. This total is
divided by the number of units produced to determine the
cost per unit.
o
Thus, the 20 Jazz Series guitars produced as Job 71 cost
$512.50 ($10,250 ÷ 20) per guitar.
• After completion, Job 71 is transferred from Work in
Process to Finished Goods by the following entry:
Finished goods
Work in process
10,250
10,250
Job 71 completed in December
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Work in Process
(slide 3 of 3)
• Job 72 was started in December but was not
completed by December 31, 2018. Thus, Job 72
is still part of work in process on December 31,
2018.
o Note that the balance of the job cost sheet for Job 72
($21,000) is also the December 31, 2018, balance of
Work in Process.
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Finished Goods
• The finished goods account is a controlling
account for the subsidiary finished goods
ledger or stock ledger.
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Finished Goods Ledger Account
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Sales and Cost of Goods Sold
• During December, Legend Guitars sold 40 Jazz
Series guitars for $850 each, generating total sales
of $34,000 ($850 × 40 guitars). The cost per guitar
sold was $500 or a total cost of $20,000 ($500 ×
40). The entries to record the sale and related cost
of goods sold are as follows:
Accounts receivable
34,000
Sales
34,000
Revenues received from guitars sold on
account
Costs of goods sold
Finished goods
20,000
20,000
Cost of 40 Jazz Series guitars sold
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Period Costs
(slide 1 of 2)
Used in generating
revenue during the
current period
Period costs
Not involved in the
manufacturing
process
Selling
expenses
Recorded as
expenses of the
current period
Administrative
expenses
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Period Costs
(slide 2 of 2)
• Selling expenses are incurred in marketing and
delivering the sold product to customers.
• Administrative expenses are incurred in
managing the company, but are not related to
the manufacturing or selling functions.
• During December Legend Guitars recorded the
following selling and administrative expenses:
Sales salaries expense
2,000
Office salaries expense
1,500
Salaries payable
3,500
Recorded December period costs
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Flow of Manufacturing Costs for Legend
Guitars
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Summary of Cost Flows for Legend Guitars
• Slide 52 shows the cost flows through the
manufacturing accounts of Legend Guitars for
December.
o The balances of Materials, Work in Process, and
Finished Goods are supported by their subsidiary
ledgers.
Controlling account
Balance and total of
related subsidiary ledger
($)
Materials
3,500
Work in process
21,000
Finished goods
10,250
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Income Statement of Legend Guitars
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Job Order Cost Systems for Service Businesses
(slide 1 of 2)
• A job order cost accounting system may be used
by a professional service business.
o For example, an advertising agency, an attorney, and
a physician each provide services to individual
customers, clients, or patients. In such cases, the
customer, client, or patient can be viewed as a job for
which costs are accumulated.
© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Job Order Cost Systems for Service Businesses
(slide 2 of 2)
• The primary product costs for a service business are direct labor and
overhead costs. Any materials or supplies are insignificant and are
included as part of overhead costs.
• Like a manufacturing business, direct labor and overhead costs of
rendering services to clients are accumulated in a work in process
account.
• When the job is completed and the client is billed, the costs are
transferred to a cost of services account.
o Cost of Services is similar to the cost of merchandise sold account for a
merchandising business or the cost of goods sold account for a
manufacturing business.
• A finished goods account and related finished goods ledger are not
necessary.
o This is because the revenues for the services are recorded only after the
services are provided.
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Flow of Costs through a Service Business
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Check Up Corner
•
Job Order Costing for a Service Business
The Mad-Fly Agency provides consulting services to a variety of clients across the
country. The agency accumulates costs for each consulting project on the basis of
direct labor costs and allocated overhead costs. Mad-Fly’s estimated direct labor
and overhead costs for the year are as follows:
Direct labor hours (professional staff)
Hourly rate for professional staff
Estimated total overhead costs
•
20,000 hours
$180 per hour
$1,200,000
Mad-Fly allocates overhead costs to individual jobs based on the total estimated
direct labor hours of its professional services staff.
a. Determine Mad-Fly’s estimated predetermined overhead rate for the year.
b. Mad-Fly started and completed a consulting job for MT Industries during the
year (Job 402). The job required 200 direct labor hours of professional staff.
Determine the cost of the MT Industries job (Job 402).
© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Check Up Corner
Applying Overhead and
Determining Job Cost
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Job Order Costing for Decision Making
(slide 1 of 2)
• A job order cost accounting system accumulates
and records product costs by jobs. The resulting
total and unit product costs can be compared to
similar jobs, compared over time, or compared to
expected costs.
o In this way, a job order cost system can be used by
managers for cost evaluation and control.
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Comparing Data from Job Cost Sheets
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Job Order Costing for Decision Making
(slide 2 of 2)
• The job cost sheets can be analyzed for
possible reasons for the increased materials
cost for Job 63.
• Because the materials price did not change
($10 per board foot), the increased materials
cost must be related to the wood used.
• Thus, Legend Guitars should conduct an
investigation to determine the cause of the
extra 100 board feet used for Job 63.
© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 3
Process Cost
Systems
Learning Objectives
(slide 1 of 2)
• Obj. 1: Describe process cost systems.
• Obj. 2: Prepare a cost of production report.
• Obj. 3: Journalize entries for transactions using a
process cost system.
• Obj. 4: Describe and illustrate the analysis of unit cost
changes between periods.
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Learning Objectives
(slide 2 of 2)
• Obj. 5: Describe and illustrate the use of a cost of
production report in evaluating a company’s
performance.
• Obj App: Describe and illustrate the weighted
average method of preparing a cost of production
report.
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Accounting for Process Manufacturers
(slide 1 of 2)
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Accounting for Process Manufacturers
(slide 2 of 2)
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Examples of Process Cost and Job Order
Companies
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Process Cost System and Job Order Cost
System – Similarities
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Process Cost and Job Order Cost Systems
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Comparing Job Order and
Process Cost Systems
• Process and job order cost systems are different in
several ways.
o A process cost system accumulates (records) product
costs in work in process accounts for each department.
In contrast, a job order cost system accumulates
(records) product costs by jobs, using job cost sheets.
o In a job order cost system, the work in process at the
end of the period is the sum of the job cost sheets for
partially completed jobs. In a process cost system, the
work in process at the end of the period is the sum of
the costs remaining in each department account at the
end of the period.
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Physical Flows for a Process Manufacturer
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Cost Flows for a Process Manufacturer—
Frozen Delight
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Cost of Production Report
(slide 1 of 4)
• In a process cost system, the cost of units transferred
out of each processing department must be
determined along with the cost of any partially
completed units remaining in the department. The
report that summarizes these costs is a cost of
production report.
o The cost of production report summarizes the
production and cost data for a department as follows:
▪ The units the department is accountable for and the
disposition of those units.
▪ The product costs incurred by the department and the
allocation of those costs between completed (transferred
out) and partially completed units.
© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Preparing a Cost of Production Report
Determine
units to be
assigned costs
Compute
equivalent
units of
production
Determine cost
per equivalent
unit
Allocate costs
to units
transferred out
and to partially
completed
units
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Cost of Production Report
(slide 2 of 4)
• Preparing a cost of production report requires making
a cost flow assumption.
• Like merchandise inventory, costs can be assumed
to flow through the manufacturing process using the
first-in, first-out (F I F O), last-in, first-out (L I F O), or
average cost methods.
o Because the first-in, first-out (F I F O) method is often
the same as the physical flow of units, the FIFO
method is used in this chapter.
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Cost of Production Report
(slide 3 of 4)
• A cost of production report for the Mixing Department of
Frozen Delight for July is prepared.
Specifics
Amount ($)
Inventory in process, July 1, 5,000 gallons:
Direct materials cost, for 5,000 gallons
5,000
Conversion costs, for 5,000 gallons, 70% completed
1,225
Total inventory process, July 1
6,225
Direct materials cost for July, 60,000 gallons
66,000
Direct labor cost for July
10,000
Factory overhead applied for July
7,275
Total production cost to account for
90,000
Gallons transferred to Packaging in July (includes units in process on July 1),
62,000 gallons
?
Inventory in process, July 31, 3,000 gallons, 25% conversion costs
?
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Cost of Production Report
(slide 4 of 4)
• By preparing a cost of production report, the cost of
the gallons transferred to the Packaging Department
in July and the ending work in process inventory in
the Mixing Department are determined.
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Step 1: Determine the Units to Be Assigned
Costs (slide 1 of 4)
• The first step is to determine the units to be
assigned costs.
o A unit can be any measure of completed production,
such as tons, gallons, pounds, barrels, or cases.
▪ For Frozen Delight, a unit is a gallon of ice cream.
© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Step 1: Determine the Units to Be Assigned
Costs (slide 2 of 4)
• The Mixing Department is accountable for
65,000 gallons of direct materials during July,
computed as follows:
Total Units (Gallons) Charged to
Production
Quantity in Gallons
In process, July 1
5,000
Received from materials storage
60,000
Total units accounted for
65,000
© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Step 1: Determine the Units to Be Assigned
Costs (slide 3 of 4)
• For July, the following three groups of units (gallons)
are assigned costs:
o Group 1: Units (gallons) in beginning work in process
inventory on July 1.
o Group 2: Units (gallons) started and completed during
July.
o Group 3: Units (gallons) in ending work in process
inventory on July 31.
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July Units to Be Costed—Mixing Department
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Step 1: Determine the Units to Be Assigned
Costs (slide 4 of 4)
• The total units (gallons) to be assigned costs for
July are summarized as follows:
Group
Particulars
Quantity in
Gallons
Group 1 Inventory in process, July 1, completed in July
5,000
Group 2 Started and completed in July
57,000
Transferred out to the Packaging
Department in July
Group 3 Inventory in process, July 31
Total units (gallons) to be assigned costs
62,000
3,000
65,000
The total gallons to be assigned costs equal the total gallons accounted for
by the Mixing Department.
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Step 2: Compute Equivalent Units of
Production (slide 1 of 5)
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Step 2: Compute Equivalent Units of
Production (slide 2 of 5)
• Assume that a 1,000-gallon batch (vat) of ice cream
at Frozen Delight is only 40% complete in the mixing
process on May 31.
o Thus, the batch is only 40% complete as to
conversion costs such as power.
▪ In this case, the whole units and equivalent units of
production are as follows:
Type of Cost
Whole Units in
Gallons
Material Costs
1,000
Conversion Costs
1,000
Equivalent Units in
Gallons
1,000
400 gallons (1000 × 40%)
© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Step 2: Compute Equivalent Units of
Production (slide 3 of 5)
• Equivalent units for materials and conversion
costs are usually determined separately.
o This is because materials and conversion costs
normally enter production at different times and rates.
▪ In contrast, direct labor and factory overhead normally enter
production at the same time and rate.
▪ For this reason, direct labor and factory overhead are
combined as conversion costs in computing equivalent units.
© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Step 2: Compute Equivalent Units of
Production (slide 4 of 5)
• To compute equivalent units for materials, it is
necessary to know how materials are added during
the manufacturing process.
o In the case of Frozen Delight, all the materials are
added at the beginning of the mixing process.
Group
Specifics
Whole Units
Group 1
Inventory in process, July 1
5,000
Group 2
Started and completed in July
(62,000 − 5,000)
57,000
Group 3
Transferred out to Packaging
Department in July
62,000
Inventory in process, July 31
3,000
Total gallons to be assigned costs
65,000
Percent Materials
Added in July
Units for Direct
Materials
0%
0
100%
57,000
57,000
100%
© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
3,000
60,000
Direct Materials Equivalent Units
© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Step 2: Compute Equivalent Units of
Production (slide 5 of 5)
• To compute equivalent units for conversion costs, it is
necessary to know how direct labor and factory overhead
enter the manufacturing process.
o
Direct labor, utilities, and equipment depreciation are often incurred
uniformly during processing. Hence, it is assumed that Frozen Delight
incurs conversion costs evenly throughout its manufacturing process.
Group
Specifics
Whole
Units
Percent Conversion
Completed in July
Equivalent Units
for Conversion
Group 1
Inventory in process, July 1 (70%
completed)
5,000
30%
1,500
Group 2
Started and completed in July (62,000
− 5,000)
57,000
100%
57,000
Transferred out to Packaging
Department in July
62,000
Inventory in process, July 31 (25%
completed)
3,000
Total gallons to be assigned costs
65,000
Group 3
58,500
25%
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750
59,250
Conversion Equivalent Units
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Check Up Corner 17-1
•
Equivalent Exits
The Bottling Department of Rocky Springs Beverage Company had 2,000
liters in the beginning work in process (30% complete). During the month,
28,500 liters were started and 29,000 liters were completed. The ending
work in process inventory was 1,500 liters (60% complete). Materials are
added at the beginning of the process, while conversion costs are added
evenly throughout the process.
a. How many units were started and completed during the month?
b. What are the total equivalent units for:
1.
2.
Direct materials
Conversion costs
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Check Up Corner 17-1
Equivalent Exits
Solution (slide 1 of 3)
a. The units started and completed can be computed as follows:
Alternative One
Units
Alternative Two
Units
Completed (transferred out)
29,000
Started (during month)
28,500
Inventory in process
(beginning)
(2,000)
Inventory in process
(beginning)
(1,500)
Started and completed
27,000
Started and completed
27,000
© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Check Up Corner 17-1
Equivalent Exits
Solution (slide 2 of 3)
b.
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Check Up Corner 17-1
Equivalent Exits
Solution (slide 3 of 3)
© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Step 3: Determine the Cost per Equivalent Unit
(slide 1 of 4)
• The cost per equivalent unit for direct materials
and conversion costs is computed as follows:
© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Step 3: Determine the Cost per Equivalent Unit
(slide 2 of 4)
• The July direct materials and conversion cost
equivalent units for Frozen Delight’s Mixing
Department from Step 2 are as follows:
Equivalent Units
Direct
Materials
Group
Specifics
Group 1
Inventory in process, July 1
0
1,500
Group 2
Started and completed in July
(62,000 − 5,000)
57,000
57,000
Transferred out to Packaging
Department in July
57,000
58,500
Inventory in process, July 31
3000
750
Total gallons to be assigned costs
60,000
59,250
Group 3
Conversion
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Step 3: Determine the Cost per Equivalent Unit
(slide 3 of 4)
• The direct materials and conversion costs
incurred by Frozen Delight in July are as follows:
Direct Materials
$66,000
Conversion costs
Direct labor
$10,500
Factory overhead
$7,275
Total product costs incurred in July
$17,775
$83,775
© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Step 3: Determine the Cost per Equivalent Unit
(slide 4 of 4)
• The direct materials and conversion costs per
equivalent unit are computed as follows:
© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Step 4: Allocate Costs to Units Transferred
Out and Partially Completed Units (slide 1 of 8)
• Product costs must be allocated to the units
transferred out and the partially completed units on
hand at the end of the period.
o The product costs are allocated using the costs per
equivalent unit for materials and conversion costs that
were computed in Step 3.
© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Step 4: Allocate Costs to Units Transferred
Out and Partially Completed Units (slide 2 of 8)
• The total production costs to be assigned for
Frozen Delight in July are $90,000, computed as
follows:
Specifics
Cost ($)
Inventory in process, July 1, 5,000 gallons:
Direct materials cost, for 5,000 gallons
5,000
Conversion costs, for 5,000 gallons, 70% completed
1,225
Total inventory in process, July 1
6,225
Direct materials cost for July, 60,000 gallons
66,000
Direct labor cost for July
10,500
Factory overhead applied for July
7,275
Costs incurred in July
83,775
Total production costs to account for
90,000
© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Step 4: Allocate Costs to Units Transferred
Out and Partially Completed Units (slide 3 of 8)
• The units to be assigned these costs follow. The
costs to be assigned these units are indicated by
question marks.
Group
Specifics
Whole
Units
(Gallons)
Total Cost ($)
Group 1
Inventory in process, July 1,
completed in July
5,000
?
Group 2
Started and completed in July
57,000
?
Transferred out to the
Packaging Department in July
62,000
?
Inventory in process, July 31
3,000
?
65,000
90,000
Group 3
Total
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Step 4: Allocate Costs to Units Transferred
Out and Partially Completed Units (slide 4 of 8)
• The 5,000 gallons of inventory in process on July
1 (Group 1) were completed and transferred out
to the Packaging Department in July. The cost of
these units is determined as follows:
Specifics
Direct Materials
Costs ($)
Conversion
Costs ($)
Inventory in process, July 1 balance
0
0
Equivalent units for completing the July 1
in-process inventory
0
1,500
Cost per equivalent unit
× 1.10
Cost of July 1 in-process inventory
0
Cost of July 1 in-process inventory
transferred to the Packaging
Department
Total
Costs ($)
6,225
× 0.30
450
450
6,675
© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Step 4: Allocate Costs to Units Transferred
Out and Partially Completed Units (slide 5 of 8)
• The 57,000 units started and completed in July
(Group 2) incurred all (100%) of their direct
materials and conversion costs in July.
o Thus, the cost of the 57,000 gallons started and
completed is computed by multiplying 57,000 gallons
by the costs per equivalent unit for materials and
conversion costs as follows:
Specifics
Units started and
completed in July
Cost per equivalent unit
Cost of the units started
and completed in July
Direct
Materials Cost
Conversion
Costs
57,000 gallons
57,000 gallons
× $1.10
× $0.30
$62,700
$17,100
Total
Costs
$79,800
© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Step 4: Allocate Costs to Units Transferred
Out and Partially Completed Units (slide 6 of 8)
• The total cost transferred to the Packaging
Department in July is the sum of the beginning
inventory cost and the costs of the units started
and completed in July, computed as follows:
Group
Specifics
Amount ($)
Group 1
Cost of July 1 in-process inventory
6,675
Group 2
Cost of the units started and
completed in July
79,800
Total costs transferred to the
packaging department in July
86,475
© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Step 4: Allocate Costs to Units Transferred
Out and Partially Completed Units (slide 7 of 8)
• The 3,000 gallons in process on July 31 (Group
3) incurred all their direct materials costs and
25% of their conversion costs in July. The cost of
these partially completed units is computed as
follows:
Specifics
Direct Materials
Costs
Conversion
Costs
Equivalent units in ending
inventory
3,000 gallons
750 gallons
Cost per equivalent unit
× $1.10
× $0.30
Cost of 31 July in-process
inventory
$3,300
$225
Total Costs
$3,525
© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Step 4: Allocate Costs to Units Transferred
Out and Partially Completed Units (slide 8 of 8)
• To summarize, the total manufacturing costs for
Frozen Delight in July were assigned as follows:
Whole Units
(Gallons)
Group
Specifics
Group 1
Inventory in process, July 1,
completed in July
5,000
6,675
Group 2
Started and completed in July
57,000
79,800
Transferred out to the
Packaging Department in
July
62,000
86,475
Inventory in process, July 31
3,000
3,525
Total
65,000
90,000
Group 3
Total Cost ($)
© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Preparing the Cost of Production Report
• A cost of production report is prepared for each
processing department at periodic intervals.
• The report summarizes the following production
quantity and cost data:
o The units for which the department is accountable
and the disposition of those units.
o The production costs incurred by the department and
the allocation of those costs between completed
(transferred out) and partially completed units.
© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Cost of Production Report for Frozen
Delight’s Mixing Department—F I F O
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Check Up Corner
Cost per Equivalent Unit
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Check Up Corner
Cost per Equivalent Unit
Solution (slide 1 of 2)
a. 1.
2.
Costs per equivalent unit are used to allocate the direct
materials and conversion costs to the completed and
partially completed units in part b.
© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Check Up Corner
Cost per Equivalent Unit
Solution (slide 2 of 2)
b.
Direct
Materials
Costs ($)
Specifics
Conversion
Costs($)
Inventory in process, beginning of period
1,860
To complete inventory in process, beginning
of period
Started and completed during the period
0
$420a
420
21,600b
8,100c
29,700
Transferred out of Bottling (completed)
Inventory in process, end of period
Total
Costs($)
31,980
1,200d
270e
1,470
Total costs assigned by the Bottling
Department
33,450
Completed and transferred out of production
31,980
Inventory in process, ending
1,470
a1,400 units × $0.30 = $420
b27,000 units × $0.80 = $21,600
d1,500 units × $0.80 = $1,200
c27,000 units × $0.30 = $8,100
e900 units × $0.30 = $270
No materials cost is added
during the current period for
beginning inventory.
© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Journal Entries for a Process Cost System
(slide 1 of 6)
• The journal entries for Frozen Delight’s July
transactions are shown on the next four slides.
o To simplify, the entries are shown in summary form,
even though many of the transactions would be
recorded daily.
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Journal Entries for a Process Cost System
(slide 2 of 6)
a. Purchased materials, including milk, cream, sugar, packaging, and
indirect materials on account, $88,000.
Materials
$88,000
Accounts Payable
$88,000
a. The Mixing Department requisitioned milk, cream, and sugar,
$66,000. This is the total amount from the original July data.
Packaging materials of $8,000 were requisitioned by the Packaging
Department. Indirect materials for the Mixing and Packaging
departments were $4,125 and $3,000, respectively.
Work in Process—Mixing
$66,000
Work in Process—Packaging
$8,000
Factory Overhead—Mixing
$4,125
Factory Overhead—Packaging
$3,000
Materials
$81,125
© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Journal Entries for a Process Cost System
(slide 3 of 6)
c. Incurred direct labor in the Mixing and Packaging
departments of $10,500 and $12,000, respectively.
Work in Process—Mixing
$10,500
Work in Process—Packaging
$12,000
Wages Payable
$22,500
c. Recognized equipment depreciation for the Mixing and
Packaging departments of $3,350 and $1,000,
respectively.
Factory Overhead—Mixing
$3,350
Factory Overhead—Packaging
$1,000
Wages Payable
$4,350
© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Journal Entries for a Process Cost System
(slide 4 of 6)
e. Applied factory overhead to Mixing and Packaging
departments of $7,275 and $3,500, respectively.
Work in Process—Mixing
$7,275
Work in Process—Packaging
$3,500
Factory Overhead—Mixing
$7,725
Factory Overhead—Packaging
$3,500
e. Transferred costs of $86,475 from the Mixing
Department to the Packaging Department per the cost
of production report.
Work in Process—Packaging
$86,475
Work in Process—Mixing
$86,475
© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Journal Entries for a Process Cost System
(slide 5 of 6)
g. Transferred goods of $106,000 out of the Packaging
Department to Finished Goods according to the
Packaging Department cost of production report.
Finished Goods—Ice Cream
$106,000
Work in Process—Packaging
$106,000
g. Recorded the cost of goods sold out of the finished
goods inventory of $107,000.
Cost of Goods Sold
$107,000
Finished Goods—Ice Cream
$107,000
© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Frozen Delight’s Cost Flows
© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Journal Entries for a Process Cost System
(slide 6 of 6)
• The ending inventories for Frozen Delight are
reported on the July 31 balance sheet as
follows:
Specifics
Amount ($)
Materials
6,875
3,525
Work in process–Mixing Department
(Determined from the cost of
production report)
Work in process–Packaging Department
7,725
Finished Goods
4,000
Total inventories
22,125
© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Check Up Corner
•
Process Costing Journal Entries
The cost of materials transferred into the Bottling Department of Rocky Springs
Beverage Company is $22,800, including $20,000 from the Blending Department
and $2,800 from the materials storeroom. The conversion costs for the period in
the Bottling Department are $8,790 ($3,790 factory overhead applied and $5,000
direct labor). The total cost transferred to Finished Goods during the period is
$31,980. The Bottling Department had a beginning work in process inventory of
$1,860.
a.
Journalize:
1.
2.
3.
b.
The cost of transferred-in materials
The conversion costs
The costs transferred out
Determine the balance of Work in Process—Bottling at the end of
the period.
• Note: The costs transferred out of the Bottling Department and the cost of the
Bottling Department’s ending inventory are computed in Check Up Corner 17-2.
© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Check Up Corner
Process Costing Journal Entries
© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Using the Cost of Production Report for
Decision Making—Frozen Delight (slide 1 of 3)
• Frozen Delight’s cost of production report for the
Mixing Department shows that beginning
inventory is $6,225 (see slide 40). The July 1
inventory in process of $6,225 consists of the
following costs:
Specifics
Amount ($)
Direct materials cost, 5,000
gallons
5,000
Conversion costs, 5,000
gallons, 70% completed
1,225
Total inventory in
process, July 1
6,225
© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Using the Cost of Production Report for
Decision Making—Frozen Delight (slide 2 of 3)
• Using the preceding data, the June costs per
equivalent unit of materials and conversion costs
can be determined as follows:
© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Using the Cost of Production Report for
Decision Making—Frozen Delight (slide 3 of 3)
• In July, the cost per equivalent unit of materials
increased by $0.10 per gallon, while the cost per
equivalent unit for conversion costs decreased
by $0.05 per gallon, computed as follows:
Specifics
July ($)*
June ($)
Increase
(Decrease) ($)
Cost per equivalent unit for direct
materials
1.10
1.00
0.10
Cost per equivalent unit for
conversion costs
0.30
0.35
(0.05)
*From Exhibit 8
© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Using the Cost of Production Report for
Decision Making—Holland Beverage Company
(slide 1 of 2)
• A cost of production report may be prepared showing more
cost categories beyond just direct materials and conversion
costs.
• To illustrate, the Blending Department of Holland Beverage
Company prepared cost of production reports for April and
May showing multiple cost categories, as follows:
© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Using the Cost of Production Report for
Decision Making—Holland Beverage Company
(slide 2 of 2)
• The May results indicate that total unit costs have
increased from $0.50 to $0.53, or 6% in May.
• To determine the possible causes for this increase, the
cost of production report is restated in per-unit terms by
dividing the costs by the number of units completed, as
follows:
© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Yield
(slide 1 of 2)
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Yield
(slide 2 of 2)
• Assume that 1,000 pounds of sugar enter the
Packaging Department, and 980 pounds of sugar
were packed.
o
The yield is computed as follows:
© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Appendix: Determining Cost Using the Average
Cost Method (slide 1 of 2)
• Assume that S&W Ice Cream Company (S&W)
mixes direct materials (milk, cream, sugar) in
refrigerated vats and has two manufacturing
departments, Mixing and Packaging.
o The manufacturing data for the Mixing Department for
July are as follows:
Specifics
Amount ($)
Inventory in process, July 1, 5,000 gallons (70% completed)
6,200
Direct materials cost incurred in July, 60,000 gallons
66,000
Direct labor cost in July
10,500
Factory overhead applied in July
6,405
Total production costs to account for
© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
89,105
Appendix: Determining Cost Using the Average
Cost Method (slide 2 of 2)
• Under the average cost method, all production
costs (materials and conversion costs) are
combined together for determining equivalent
units and cost per equivalent unit.
Amount
Specifics
(To be determined by
preparing a cost of
production report)
Cost of goods transferred to Packaging in July
(includes units in process on July 1), 62,000
gallons
?
Cost of work in process inventory, July 31,
3,000 gallons, 25% completed as to
conversion costs
?
© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Appendix: Step 1:
Determine the Units to Be Assigned Costs (slide 1 of 3)
• The first step is to determine the units to be assigned
costs.
o
A unit can be any measure of completed production, such
as tons, gallons, pounds, barrels, or cases.
▪ For S&W, a unit is a gallon of ice cream.
• S&W’s Mixing Department had 65,000 gallons of direct
materials to account for during July, as shown here:
Specifics
Total Gallons to
Account for
Inventory in process, July 1
5,000 gallons
Received from materials storeroom
60,000 gallons
Total units to account for by the Packaging Department
65,000 gallons
© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Appendix: Step 1:
Determine the Units to Be Assigned Costs (slide 2 of 3)
• There are two groups of units to be assigned
costs for the period.
© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Appendix: Step 1:
Determine the Units to Be Assigned Costs (slide 3 of 3)
• The total units (gallons) to be assigned costs for
S&W can be summarized as follows:
Group
Specifics
Number of Gallons
Group 1
Units transferred out to the
Packaging Department in July
62,000
Group 2
Inventory in process, July 31
3,000
65,000
Total gallons to be assigned
costs
(Total gallons to be assigned
costs equal the total units to
account for)
© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Appendix: Step 2:
Compute Equivalent Units of Production (slide 1 of 2)
• S&W has 3,000 gallons of whole units in the work in process
inventory for the Mixing Department on July 31. Because these
units are 25% complete, the number of equivalent units in
process in the Mixing Department on July 31 is 750 gallons
(3,000 gallons × 25%). Because the units transferred to the
Packaging Department have been completed, the whole units
(62,000 gallons) transferred are the same as the equivalent units
transferred.
© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Appendix: Step 2:
Compute Equivalent Units of Production (slide 2 of 2)
• The total equivalent units of production for the Mixing
Department are determined by adding the equivalent units in
the ending work in process inventory to the units transferred
and completed during the period, computed as follows:
Specifics
Number of Gallons
Equivalent units completed and transferred to
the Packaging Department during July
62,000
Equivalent units in ending work in process,
July 31
750
Total equivalent units
62,750
© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Appendix: Step 3:
Determine the Cost per Equivalent Unit
• Because materials and conversion costs are combined
under the average cost method, the cost per equivalent
unit is determined by dividing the total production costs
by the total equivalent units of production as follows:
© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Appendix: Step 4: Allocate Costs to
Transferred Out and Partially Completed Units
• The cost of transferred and partially completed
units is determined by multiplying the cost per
equivalent unit times the equivalent units of
production. For S&W’s Mixing Department, these
costs are determined as follows:
Group
Specifics
Amount ($)
Group 1
Transferred out to the Packaging
Department (62,000 gallons × $1.42)
88,040
Group 2
Inventory in process, July 31 (3,000
gallons × 25% × $1.42)
1,065
Total production costs
89,105
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Cost of Production Report for S&W’s
Mixing Department—Weighted Average Method
© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.