Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
17-23 (20-25 min.) Operation costing.
Whole Goodness Bakery needs to determine the cost of two work orders for the month of June.
Work order 215 is for 2,400 packages of dinner rolls, and work order 216 is for 2,800 loaves of
multigrain bread. Dinner rolls are mixed and cut into individual rolls before being baked and
then packaged. Multigrain loaves are mixed and shaped before being baked, sliced, and
packaged. The following information applies to work order 215 and work order 216:
Selected budget information for June follows:
Budgeted conversion costs for each operation for June follow:
17-/
Required:
1. Using budgeted number of packages as the denominator, calculate the budgeted
conversion-cost rates for each operation.
2. Using the information in requirement 1, calculate the budgeted cost of goods manufactured
for the two June work orders.
3. Calculate the cost per package of dinner rolls and multigrain loaves for work order 215 and
216.
SOLUTION
1. To obtain the conversion-cost rates, divide the budgeted cost of each operation by the number
of packages that are expected to go through that operation.
Budgeted
Conversion
Cost
Budgeted
Number of
Packages
Conversion
Cost per
Package
Mixing $18,080 22,600 $0.80
Shaping 3,250 13,000 0.25
2.
Work Order Work Order
#215 #216
Bread type: Dinner Roll Multigrain Loaves
Quantity: 2,400 2,800
17-/
The direct materials costs per unit vary based on the type of bread ($5,280 ÷ 9,600 = $0.55 for
3. Work order #215 (Dinner rolls): Work order #216 (Multigrain loaves):
Total cost $ 6,960 Total cost: $9,660
17-24 (25 min.) Weighted-average method, assigning costs.
Tomlinson Corporation is a biotech company based in Milpitas. It makes a cancer-treatment drug
in a single processing department. Direct materials are added at the start of the process.
Conversion costs are added evenly during the process. Tomlinson uses the weighted-average
method of process costing. The following information for July 2014 is available.
aDegree of completion: direct materials, 100%; conversion costs, 25%.
bDegree of completion: direct materials, 100%; conversion costs, 70%.
17-/
Required:
1. Calculate the cost per equivalent unit for direct materials and conversion costs.
2. Summarize the total costs to account for, and assign them to units completed (and transferred
out) and to units in ending work in process.
SOLUTION
1. & 2. Solution Exhibit 17-24A shows equivalent units of work done to date for Tomlinson
SOLUTION EXHIBIT 17-24A
Summarize the Flow of Physical Units and Compute Output in Equivalent Units;
Weighted-Average Method of Process Costing, Tomlinson Corporation for July 2014.
(Step 2)
(Step 1) Equivalent Units
Physical Direct Conversion
Flow of Production Units Materials Costs
Work in process, beginning (given) 8,700
Started during current period (given) 34 ,500
To account for 43 ,200
17-/
SOLUTION EXHIBIT 17-24B
Summarize the Total Costs to Account for, Compute the Cost per Equivalent Unit, and Assign
Costs to the Units Completed and Units in Ending Work-in-Process Inventory;
Weighted-Average Method of Process Costing for Tomlinson Corporation for July 2014.
Total
Production
Costs
Direct
Materials
Conversion
Costs
(Step 3) Work in process, beginning (given) $104,700 $ 61,500 $ 43,200
Costs added in current period (given) 800,004 301,380 498,624
Total costs to account for $904,704 $ 362,880 $ 541,824
*Equivalent units completed and transferred out (given).
†Equivalent units in ending work in process (given).
17-25 (30 min.) FIFO method, assigning costs.
Required:
1. Do Exercise 17-24 using the FIFO method.
2. Tomlinson’s management seeks to have a more consistent cost per equivalent unit. Which
method of process costing should the company choose and why?
SOLUTION
17-/
1. Solution Exhibit 17-25A calculates the equivalent units of work done in the current
inventory.
SOLUTION EXHIBIT 17-25A
Summarize the Flow of Physical Units and Compute Output in Equivalent Units;
FIFO Method of Process Costing, Tomlinson Corporation for July 2014.
(Step 1)
(Step 2)
Equivalent Units
Flow of Production
Physical
Units
Direct
Materials
Conversion
Costs
Work in process, beginning (given)
Started during current period (given)
To account for
8,700
34 ,500
43 ,2 00
(work done before current
period)
§Degree of completion in this department: direct materials, 100%; conversion costs, 25%.
†32,000 physical units completed and transferred out minus 8,700 physical units completed and transferred out from
beginning work-in-process inventory.
*Degree of completion in this department: direct materials, 100%; conversion costs, 70%
17-/
17-/
2. Using the weighted average method will result in a greater degree of cost smoothing because the cost of beginning inventory is
mixed together with costs added each period. This will produce a more consistent cost per equivalent unit than the FIFO method.
17-/
17-26 (35–40 min.) Transferred-in costs, weighted-average method.
Trendy Clothing, Inc., is a manufacturer of winter clothes. It has a knitting department and a
finishing department. This exercise focuses on the finishing department. Direct materials are
added at the end of the process. Conversion costs are added evenly during the process. Trendy
uses the weighted-average method of process costing. The following information for June 2014
is available.
Required:
1. Calculate equivalent units of transferred-in costs, direct materials, and conversion costs.
2. Summarize the total costs to account for, and calculate the cost per equivalent unit for
transferred-in costs, direct materials, and conversion costs.
3. Assign costs to units completed (and transferred out) and to units in ending work in process.
SOLUTION
1, 2. & 3. Solution Exhibit 17-26A calculates the equivalent units of work done to date. Solution
Exhibit 17-26B summarizes total costs to account for, calculates the cost per equivalent unit of
SOLUTION EXHIBIT 17-26A
Summarize the Flow of Physical Units and Compute Output in Equivalent Units;
(Step 1) (Step 2)
Equivalent Units
Flow of Production
Physical
Units
Transferred-
in Costs
Direct
Material
s
Conversio
n
Costs
17-/
Work in process, beginning (given) 60
Transferred in during current period (given) 100
To account for 160
17-/
SOLUTION EXHIBIT 17-26B
Summarize the Total Costs to Account for, Compute the Cost per Equivalent Unit, and
Assign Costs to the Units Completed and Units in Ending Work-in-Process Inventory;
Weighted-Average Method of Process Costing, Finishing Department of Trendy Clothing
for June 2014.
Total
Production
Costs
Transferred-in
Costs
Direct
Materials
(Step 3) Work in process, beginning (given) $84,000 $ 60,000 $ 0
Costs added in current period (given) 206 ,400 117,0 00 27,0 00
Total costs to account for $ 290 ,400 $ 177,0 00 $ 27,0 00
17-/
17-/
17-/
