Select your language

Suggested languages for you:
Log In Start studying!
Answers without the blur. Just sign up for free and you're in → Illustration

Q42PGB

Expert-verified
Horngren'S Financial And Managerial Accounting
Found in: Page 1023

Short Answer

Casey Carpet manufactures broadloom carpet in seven processes: spinning, dyeing, plying, spooling, tufting, latexing, and shearing. In the Dyeing Department, direct materials (dye) are added at the beginning of the process. Conversion costs are incurred evenly throughout the process. Information for July 2018 follows:

UNITS

Beginning work-in-process inventory

75 rolls

Transferred in from spinning department during July

590 rolls

Completed during July

550 rolls

Ending work in process inventory (80% complete for conversion work)

115 rolls

COSTS

Beginning work in process inventory (transferred in costs, $3,700, material costs, $1,450 conversion costs, $4,950)

$10,100

Transferred in from the spinning department

21,570

Material costs added during July

11,185

Conversion costs added during July (Manufacturing wages, $8,050; manufacturing overhead allocated, $45,422)

53,472

Requirements

1. Prepare a production cost report for Casey’s Dyeing Department for July. The

company uses the weighted-average method.

2. Journalize all transactions affecting Casey’s Dyeing Department during July, including the entries that have already been posted. Assume labor costs are accrued and not yet paid.

  1. Production cost report
Equivalent unit of production

UNITS

Physical units

Transferred in

Direct material

Conversion costs

Total

Units to account for:

  • Beginning WIP

75

  • Transferred in from spinning department

590

Total units to account for

665

Units accounted for:

  • Completed and transferred

550

550

550

550

  • Ending WIP

115

115

115

92

Total units accounted for

665

665

665

642

COSTS

Transferred in

Direct materials

Conversion costs

Total costs

Costs to account for:

Beginning WIP

$3,700

$1,450

$4,950

$10,100

Cost added during the period

21,570

11,185

53,472

86,227

Total cost to account for

25,270

12,635

58,422

96,327

Divided by: total EUP

665

665

642

Cost per equivalent unit

$38

$19

$91

Costs accounted for:

  • Completed and transferred out

20,900

(550 x $38)

10,450

(550x$19)

50,050

(550x$91)

81,400

  • Ending WIP

4,370

(115x $38)

2,185

(115x$19)

8,372

(92x$91)

14,927

Total costs accounted for

25,270

12,635

58,422

96,327

2. Showing in step 5 the journal entries affecting Casey’s dyeing department during July.

See the step by step solution

Step by Step Solution

Step-by-Step Solution:Step 1: Production Cost Report

Production cost report is prepared by the companies using the process costing system while determining the total manufacturing cost. It shows the detailed costing of the products.

Step 2: Equivalent unit of production for transferred in

Step 3: Equivalent unit of production for direct material

Step 4: Equivalent unit of production for conversion costs

Step 4: Journal entries

Date

Particulars

Debit ($)

Credit ($)

1.

WIP inventory – Dyeing department

21,570

WIP inventory – Spinning department

21,570

2.

WIP inventory – Dyeing department

11,185

Raw material

11,185

3.

WIP inventory – Dyeing department

8,050

Wages payable

8,050

4.

WIP inventory – Dyeing department

45,422

Manufacturing overhead

45,422

5.

WIP inventory – plying department

81,400

WIP inventory – Dyeing department

81,400

Most popular questions for Business-studies Textbooks

Rick Pines and Joe Lopez are the plant managers for High Mountain Lumber’s particle board division. High Mountain Lumber has adopted a just-in-time management philosophy. Each plant combines wood chips with chemical adhesives to produce particle board to order, and all product is sold as soon as it is completed. Laura Green is High Mountain Lumber’s regional controller. All of High Mountain Lumber’s plants and divisions send Green their production and cost information. While reviewing the numbers of the two particle board plants, she is surprised to find that both plants estimate their ending Work-in-Process Inventories at 75% complete, which is higher than usual. Green calls Lopez, whom she has known for some time. He admits that to ensure their division would meet its profit goal and that both he and Pines would make their bonus (which is based on division profit), they agreed to inflate the percentage completion. Lopez explains, “Determining the percent complete always requires judgment.

Whatever the percent complete, we’ll finish the Work-in-Process Inventory first thing next year.”

Requirements

  1. How would inflating the percentage completion of ending Work-in-Process Inventory help Pines and Lopez get their bonus?
  2. The particle board division is the largest of High Mountain Lumber’s divisions. If Green does not correct the percentage completion of this year’s ending Work-in-Process Inventory, how will the misstatement affect High Mountain Lumber’s financial statements?
  3. Evaluate Lopez’s justification, including the effect, if any, on next year’s financial statements.
  4. Address the following: What is the ethical issue? What are the options? What are the potential consequences? What should Green do?

PepsiCo, Inc. is a global food and beverage company that manufactures brands such as Frito-Lay, Gatorade, Pepsi-Cola, Quaker, and Tropicana. One of the products PepsiCo, Inc. manufactures is Mountain Dew. The first process in manufacturing Mountain Dew consists of clarifying the water to remove impurities such as organic materials and bacteria. The clarification process involves mixing the water with aluminum sulfate (an indirect material) to remove the impurities.

Assume PepsiCo uses the weightedaverage method of process costing.

Requirements

1. During the month of June, the Clarification Department incurred the following costs in processing 100,000 liters:

Wages of workers operating the clarification equipment

$20,000

Manufacturing overhead allocated to clarification

24,000

Water

160,000

PepsiCo had no beginning Work-In-Process Inventory in the Clarification Department in June. Compute the June conversion costs in the Clarification Department.

2. Assume that water is added at the beginning of the clarification process and conversion costs are added evenly throughout the process. The Clarification Department completed and transferred out 60,000 liters during June. The 40,000 liters remaining in Clarification’s ending Work-in-Process Inventory were 100% complete for direct materials and 60% complete for conversion costs. Compute the equivalent units of production for direct materials and conversion costs for the Clarification Department.

3. Compute the cost per equivalent unit for direct materials and conversion costs for the Clarification Department.

Icon

Want to see more solutions like these?

Sign up for free to discover our expert answers
Get Started - It’s free

Recommended explanations on Business-studies Textbooks

94% of StudySmarter users get better grades.

Sign up for free
94% of StudySmarter users get better grades.