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Chapter 18: Q14SE (page 1009)

Miller Company sells several products. Sales reports show that the sales volume of its most popular product has increased the past three quarters while overall profits have decreased. How might production cost reports assist management in making decisions about this product?

Short Answer

Expert verified

Managers see how the costs are required to make a product with the help of a production cost report.

Step by step solution

01

Meaning of Production cost

The overall cost paid by a firm to make a given amount of an item or provide a benefit alludes to the cost of production. The cost of production is portrayed in financial matters as the costs exhausted to urge the components of production required within the manufacturing handle of a product, such as labor, land, and capital.

02

 Production cost report helps the management to decide on this product

The production report will show management how much it costs to produce the product. The company can see if the direct materials or conversion prices have increased. They can either identify a strategy to cut expenses or evaluate and must be raised the sales price.

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Most popular questions from this chapter

Mayhem Electronics makes game consoles in three processes: assembly, programming, and packaging. Direct materials are added at the beginning of the assembly process. Conversion costs are incurred evenly throughout the process. The Assembly Department had no Work-in-Process Inventory on March 31. In mid-April, Mayhem Electronics started production on 99,000 game consoles. Of this number, 95,000 game consoles were assembled during April and transferred out to the Programming Department. The April 30 Work-in-Process Inventory in the Assembly Department was 45% of the way through the assembly process. Direct materials costing \(301,950 were placed in production in Assembly during April, direct labor of \)100,960 was assigned, and manufacturing overhead of $136,200 was allocated to that department.

Requirements

1. Prepare a production cost report for the Assembly Department for April. The

company uses the weighted-average method.

2. Prepare a T-account for Work-in-Process Inventory—Assembly to show its activity during April, including the April 30 balance.

Refreshing Water Company produces premium bottled water. In the second department, the Bottling Department, conversion costs are incurred evenly throughout the bottling process, but packaging materials are not added until the end of the process. Costs in beginning Work-in-Process Inventory include transferred in costs of \(1,400, direct labor of \)700, and manufacturing overhead of \(330. March data for the Bottling Department follow:


REFRESHING WATER COMPANY

WORK-IN-PROCESS INVENTORY – BOTTLING

Month ended March 31,2018
Dollars

Units

Transferred in

Direct materials

Direct labor

Manufacturing overheads

Total costs

Beginning inventory, Mar. 1 (40% complete)

15,000

\)1,400

\(700

\)330

\(2,430

Production started

160,000

135,100

\)30,400

33,100

16,300

214,900

Transferred out

152,000

Ending inventory, Mar 31 (70% completed)

23,000

Requirements

1. Prepare a production cost report for the Bottling Department for the month of

March. The company uses the weighted-average method.

2. Prepare the journal entry to record the cost of units completed and transferred out.

3. Post all transactions to the Work-in-Process Inventory—Bottling T-account. What is the ending balance?

Question: What types of companies use process costing systems?

The Packaging Department started the month with 600 units in process, received 1,200 units from the Finishing Department, and transferred 1,500 units to Finished Goods. Direct materials are added at the beginning of the process and conversion costs are incurred evenly. The units still in process at the end of the month are 60% complete for conversion costs. Calculate the number of units still in process at the end of the month and the equivalent units of production. The company uses the weighted-average method.

Question: What are the four steps in preparing a production cost report?
See all solutions

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