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Chapter 18: Q9RQ (page 1005)
Question: What is a production cost report?
Answer:
Production cost report is the report that shows in detail total cost, including the raw material and operating costs, of manufacturing the products.
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What is the weighted-average method for process costing systems?
Bishop Company uses the FIFO method in its process costing system. The Mixing Department started the month with 500 units in a process that was 20% complete, started in the production of 2,000 units, and transferred 2,100 units to the finished goods storage area. All materials are added at the beginning of the process, and conversion costs occur evenly. The units in process at the end of the month are 45% complete concerning conversion costs. The department incurred the following costs:
Beginning WIP | Added this month | Total | |
Direct materials | \(500 | \)2,000 | \(2,500 |
Conversion cost | 1,250 | 5,450 | 6,700 |
Total | \)1,750 | \(7,450 | \)9,200 |
14A. How many units are still in process at the end of the month?
15A. Compute the equivalent production units for the Mixing Department for the current month.
16A. Determine the cost per equivalent unit for the current period for direct materials and conversion costs.
17A. Determine the cost to be transferred to the next department.
When might it be beneficial for a company to use the FIFO method? When is the weighted-average method more practical?
Salish Craft Beers provides the following information for the Malting Department for the month of August 2018:
| UNITS | COSTS | |
Beginning Work-in-Process Inventory | 0 | \(0 |
Started in Production in August | 26,000 | 54,000* |
Total to Account For | 26,000 | \)54,000 |
Completed and Transferred to Packaging Department during August | 21,000 | ? |
Ending Work-in-Process Inventory (30% complete for direct materials and 60% complete for conversion work) | 5,000 | ? |
Total Accounted For | 26,000 | \(54,000 |
* Includes \)18,000 direct materials and $36,000 conversion costs |
Requirements
Complete a production cost report for the Malting Department for the month of August 2018 to determine the cost of the units completed and transferred out, and the cost of the ending Work-in-Process Inventory. Assume Salish Craft Beers uses the weighted average method.
Describe how the FIFO method is different from the weighted-average method.
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