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Chapter 18: Q16RQ (page 1006)
What is the purpose of the Costs Accounted For section of the production cost report?
The production cost report is essential for the management because it contains vital information about the goods produced and the processing department's costs incurred in manufacturing the products.
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Bert’s Exteriors produces exterior siding for homes. The Preparation Department begins with wood, which is chopped into small bits. At the end of the process, an adhesive is added. Then the wood/adhesive mixture goes on to the Compression Department, where the wood is compressed into sheets. Conversion costs are added evenly throughout the preparation process. January data for the Preparation Department are as follows:
UNITS | |
Beginning work-in-process inventory | 0 sheets |
Started in production | 3,800 sheets |
Completed and transferred out to compression in January | 2,900 sheets |
Ending work-in-process inventory (30% of the way through the preparation process) | 900 sheets |
COSTS | |
Beginning work-in-process inventory | $0 |
Costs added during January | |
Wood | 2,888 |
Adhesive | 1,914 |
Direct labor | 987 |
Manufacturing overhead allocated | 2,500 |
Total costs | 8,289 |
Requirements
1. Prepare a production cost report for the Preparation Department for January. The company uses the weighted-average method. (Hint: Each direct material added at a different point in the production process requires its own equivalent units of production computation.)
2. Prepare the journal entry to record the cost of the sheets completed and transferred out to the Compression Department.
3. Post the journal entries to the Work-in-Process Inventory—Preparation T-account. What is the ending balance?
Question: The Jimenez Toy Company makes wooden toys. The company uses a process costing system. Arrange the company’s accounts in the order the production costs are most likely to flow, using 1 for the first account, 2 for the second, and so on.
Order | Account |
Work-in-process inventory – Packaging | |
Cost of goods sold | |
Work-in-process inventory – Cutting | |
Work-in-process inventory – Finishing | |
Finished goods inventory |
Question: Cadwell manufactures cell phones. The conversion costs to produce cell phones for November are added evenly throughout the process in the Assembly Department. The company uses the weighted-average method. For each of the following separate assumptions, calculate the equivalent units of production for conversion costs in the ending Work-in-Process Inventory for the Assembly Department:
1. 12,000 cell phones were 60% complete
2. 21,000 cell phones were 40% complete
Describe how the FIFO method is different from the weighted-average method.
The comparative financial statements of Norfolk Cosmetic Supply for 2018, 2017, and
2016 include the data shown here:
2018 2017 2016
Balance sheet—partial
Current Assets:
Cash
Short-term investments
Accounts Receivable, Net
Merchandise Inventory
Prepaid Expenses
Total Current Assets
Total Current Liabilities
Income statement—partial
Net Sales (all on account)
\( 70,000
140,000
280,000
355,000
70,000
915,000
560,000
5,890,000
\) 60,000
170,000
240,000
330,000
35,000
835,000
630,000
5,130,000
$ 50,000
120,000
260,000
310,000
35,000
775,000
640,000
4,210,000
Requirements
1. Compute these ratios for 2018 and 2017:
a. Acid-test ratio (Round to two decimals.)
b. Accounts receivable turnover (Round to two decimals.)
c. Days’ sales in receivables (Round to the nearest whole day.)
2. Considering each ratio individually, which ratios improved from 2017 to 2018 and
which ratios deteriorated? Is the trend favorable or unfavorable for the company?
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