Units Percentage completed costs Beginning WIP inventory, March............22,00
ID: 2370449 • Letter: U
Question
Units Percentage completed costs
Beginning WIP inventory, March............22,000
Direct materials.............................. 75% $22,360
Conversion costs............................ 70 27,440
Units started in March........................12,000
Costs incurred in March:
Direct materials............................. 17,000
Conversion costs........................... 16,800
Ending WIP inventory........................6,000
Direct materials............................ 80
Conversion costs.......................... 60
Use weighted-average process costing to
a. prepare a production cost report.
b. show the journal entry to transfer costs from WIP Inventory to Finished Goods Inventory.
Explanation / Answer
Adepartmentalcost of production report (CPR)shows all costs chargeable to a department. It is not only the source for summary journal entries at the end of the month but also a most convenient vehicle for presenting and disposing of costs accumulated during the month.A cost of production report shows:
It is customary to divide the cost section of the report into two parts: one showing costs for which the department is accountable, includingdepartmentaland cumulative total and unit costs, the other showing the disposition of these costs. A quantity schedule showing the total number of units for which a department is accountable and the disposition made of these units is also part of each department's cost of production report. Information in this schedule, adjusted for equivalent production is used to determine the unit costs added by a department, the costing of the ending work in process inventory, and the cost to be transferred out of the department.
A cost of production report determines periodic total and unit costs. However, a report that would merely summarize the total costs of materials, labor, and factory overhead and shows only theunit costfor the period would not be satisfactory for controlling costs. Total figures mean very little;cost controlrequires detailed data. Therefore, in most instances, the total cost is broken down bycost elementsfor each department head responsible for the costs incurred. Furthermore, detaileddepartmentalfigures are needed because of the various completion stages of the work in process inventories.
Either in the cost of production report itself or in the supporting schedules, each item of material used by a department is listed; every labor operation is shown separately; factory overhead components are noted individually; and aunit costis derived for each item. To condensethe illustratedcost of production reports, only total materials, labor, and factory overhead charged to departments are considered; and unit costs are computed only for eachcost elementrather than for each item.
The reports of The Clonex Corporation, which manufactures one product in three producing departments (Blending, Testing, and Terminal), are used to illustratethe detailsinvolved in the preparation of cost of production reports. Click on alink tosee the report of blending, testing or terminal department.
The Clonex Corporation
Blending Department (1st Dept.)
Cost of Production Report
For the Month of January, 19
====== Units transferred to next department 45,000 Units still in process(all materials - 1/2 labor and FOH) 4,000 Units lost in process 1,000
------- 50,000
====== Cost Charged To the Department: Total
Cost unit
Cost Cost added by the department: Materials $24,500 $0.50 Labor 29,140 0.62 Factory Overhead (FOH) 28,200
------- 0.60
----- Total cost to be accounted for $81,840 $1.72 ====== ==== Cost Accounted for as Follows: Transferred to next department(45,000
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