Problem 20-5A Tamar Co. manufactures a single product in one department. All dir

Question

Problem 20-5A

Tamar Co. manufactures a single product in one department. All direct materials are added at the beginning of the manufacturing process. Direct labor and overhead are added evenly throughout the process. The company uses monthly reporting periods for its weighted-average process cost accounting. During May, the company completed and transferred 22,200 units of product to finished goods inventory. Its 3,000 units of beginning goods in process consisted of $19,800 of direct materials, $123,300 of direct labor, and $98,640 of factory overhead. It has 2,400 units (100% complete with respect to direct materials and 80% complete with respect to direct labor and overhead) in process at month-end. After entries to record direct materials, direct labor, and overhead for May, the company's Goods in Process Inventory account follows.

D

Required

Prepare the company's process cost summary for May using the weighted-average method.

Prepare the journal entry dated May 31 to transfer the cost of completed units to finished goods inventory.

Check (1) EUP for both labor and overhead, 24,120 EUP

(2) Cost transferred out to finished goods, $2,664,000

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Analysis Components

The cost accounting process depends on numerous estimates.

Identify two major estimates that determine the cost per equivalent unit.

In what direction might you anticipate a bias from management for each estimate in part 3a (assume that management compensation is based on maintaining low inventory amounts)? Explain your answer.

Problem 20-6AA

FIFO: Process cost summary; equivalent units; cost estimates C3 C4 P4

Refer to the data in Problem 20-5A. Assume that Tamar uses the FIFO method to account for its process costing system. The following additional information is available:

Beginning goods in process consisted of 3,000 units that were 100% complete with respect to direct materials and 40% complete with respect to direct labor and overhead.

Of the 22,200 units completed, 3,000 were from beginning goods in process. The remaining 19,200 were units started and completed during May.

Check (1) EUP for both labor and overhead, 22,920 EUP

(2) Cost transferred out to finished goods, $2,667,840

Required

Prepare the company's process cost summary for May using FIFO.

Prepare the journal entry dated May 31 to transfer the cost of completed units to finished goods inventory.

Explanation / Answer

20-5 Part 1 TAMAR CO. Process Cost Summary – Weighted Average Method For Month Ended May 31 Costs Charged to Production Costs of beginning goods in process Direct materials $19,800 Direct labor 123,300 Factory overhead 98,640 $241,740 Costs incurred this period Direct materials 496,800 Direct labor 1,203,300 Factory overhead 962,640 2,662,740 Total costs to account for $2,904,480 Unit cost information Units to account for Units accounted for Beginning goods in process 3,000 Completed & transferred out 22,200 Units started this period 21,600 Ending goods in process 2,400 Total units to account for 24,600 Total units accounted for 24,600 Direct Materials Direct Factory Overhead Equivalent units of production Labor Units completed & transferred out 22,200 EUP 22,200 EUP 22,200 EUP Units of ending goods in process Direct materials (2,400 x 100%) 2,400 EUP Direct labor (2,400 x 80%) 1,920 EUP Factory overhead (2,400 x 80%) __________ __________ 1,920 EUP Equivalent units of production 24,600 EUP 24,120 EUP 24,120 EUP Direct Materials Direct Factory Overhead Cost per EUP Labor Cost of beginning goods in process $19,800 $123,300 $98,640 Costs incurred this period 496,800 1,203,300 962,640 Total costs $516,600 $1,326,600 $1,061,280 ÷ EUP 24,600 EUP 24,120 EUP 24,120 EUP Cost per EUP $21 per EUP $55 per EUP $44 per EUP Cost assignment and reconciliation Costs transferred out Direct materials (22,200 EUP x $21.00 per EUP) $466,200 Direct labor (22,200 EUP x $55.00 per EUP) 1,221,000 Factory overhead (22,200 x $44.00 per EUP) 976,800 $2,664,000 Costs of ending goods in process Direct materials (2,400 EUP x $21.00 per EUP) 50,400 Direct labor (1,920 EUP x $55.00 per EUP) 105,600 Factory overhead (1,920 EUP x $44.00 per EUP) 84,480 240,480 Total costs accounted for $2,904,480 Part 2 31-May Finished Goods Inventory 2,664,000       Goods in Process Inventory 2,664,000    Transfer of goods to finished inventory. Part 3 3a Two major estimates are the: i) overhead allocation rate, and ii) percentage of completion for materials, labor, and overhead. 3b Management might be interested in lower allocation rate of overhead to assign least amount of overhead to production process and this may cause underestimation of of completion %. If material are added at beginning , then this no is difficult to manage. Only left with labor and overhead that can be manipulated by management. 20-6 TAMAR CO. part 1 Process Cost Summary – FIFO Method For Month Ended May 31 Costs charged to Production Costs of beginning goods in process Direct materials $19,800 Direct labor 123,300 Factory overhead 98,640 $241,740 Costs incurred this period Direct materials 496,800 Direct labor 1,203,300 Factory overhead 962,640 2,662,740 Total costs to account for $2,904,480 Unit cost information Units to account for Units accounted for Beginning goods in process 3,000 Completed & transferred out 22,200 Units started this period 21,600 Ending goods in process 2,400 Total units to account for 24,600 Total units accounted for 24,600 Direct Materials Direct Labor Factory Overhead Equivalent units of production Units to complete beginning goods in process Direct materials (3,000 x 0%) 0 EUP Direct labor (3,000 x 60%) 1,800 EUP Factory overhead (3,000 x 60%) 1,800 EUP Units started and completed 19,200 EUP 19,200 EUP 19,200 EUP Units of ending goods in process Direct materials (2,400 x 100%) 2,400 EUP Direct labor (2,400 x 80%) 1,920 EUP Factory overhead (2,400 x 80%) _________ _________ 1,920 EUP Equivalent units of production 21,600 EUP 22,920 EUP 22,920 EUP Direct Materials Direct Labor Factory Overhead Cost per EUP Costs incurred this period $496,800 $1,203,300 $962,640 ÷ EUP ÷    21,600 ÷      22,920 ÷    22,920 Cost per EUP $23.00 per EUP $52.50 per EUP $42.00 per EUP Cost assignment and reconciliation Costs transferred out Cost of beginning goods in process $241,740 Cost to complete beginning goods in process Direct materials (0 EUP x $23.00 per EUP) $0 Direct labor (1,800 EUP x $52.50 per EUP) 94,500 Factory overhead (1,800 EUP x $42.00 per EUP) 75,600 170,100 Costs of units started and completed this period Direct materials (19,200 EUP x $23.00 per EUP) 441,600 Direct labor (19,200 EUP x $52.50 per EUP) 1,008,000 Factory overhead (19,200 EUP x $42.00 per EUP) 806,400 2,256,000 Total cost of goods finished this period 2,667,840 Costs of ending goods in process Direct materials (2,400 EUP x $23.00 per EUP) 55,200 Direct labor (1,920 EUP x $52.50 per EUP) 100,800 Factory overhead (1,920 EUP x $42.00 per EUP) 80,640 236,640 Total costs accounted for $2,904,480 part 2 31-May Finished Goods Inventory 2,667,840       Goods in Process Inventory 2,667,840    Transfer of goods to finished inventory.

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