BYP 3-1 DECISION-MAKING AT CURRENT DESIGNS
CURRENT DESIGNS
Fabrication Department
Production Cost Report
For the Month Ended April 30, 2014
Equivalent Units
Quantities
Physical
Units
Materials
Conversion
Costs
(Step 1)
(Step 2)
Units to be accounted for
Work in process, April 1
Started into production
Total units
Units accounted for
Transferred out
Work in process, April 30
Total units
30
72
102
67
35
102
67
7
74
(35 X 20%)
67
14 (35 X 40%)
81
Costs
Materials
Conversion
Costs
Total
Unit costs (Step 3)
Total cost*
Equivalent units
Unit costs [(a) ÷ (b)]
Costs to be accounted for
Work in process, April 1
Started into production
Total costs
Cost Reconciliation Schedule (Step 4)
Costs accounted for
Transferred out (67 X $950)
Work in process, April 30
Materials (7 X $350)
(a) $25,900
(b) 74
$ 350
$48,600
81
$ 600
$ 2,450
$74,500
$ 950
$17,400
57,100
$74,500
$63,650
BYP 3-2 DECISION-MAKING ACROSS THE ORGANIZATION
(a) The unit cost suggests that Joe took the highest total costs and divided
these costs by the units started into production. The highest total costs
(b) The principal errors made by Joe were: (1) he did not compute equivalent
BYP 3-2 (Continued)
(c) FLORIDA BEACH COMPANY
Mixing Department
Production Cost Report
For the Month Ended July 31, 2014
Equivalent Units
Quantities
Physical
Units
Materials
Conversion
Costs
(Step 1)
(Step 2)
Units to be accounted for
Work in process, July 1
Started into production
Total units
Units accounted for
Transferred out
8,000
100,000
108,000
103,000
103,000
103,000
Work in process, July 31
5,000
5,000
1,000
(5,000 X 20%)
Total units
108,000
108,000
104,000
Costs
Materials
Conversion
Costs
Total
Unit costs (Step 3)
Total cost
Equivalent units
Unit costs (a) ÷ (b)
Costs to be accounted for
Work in process, July 1
Started into production
Total costs
(a)
(b)
$594,000
108,000
$5.50
$832,000
104,000
$8.00
$1,426,000
$13.50
$ 88,000
1,338,000
$1,426,000
Cost Reconciliation Schedule (Step 4)
Costs accounted for
Transferred out (103,000 X $13.50)
Work in process, July 31
Materials (5,000 X $5.50)
Conversion costs (1,000 X $8.00)
Total costs
$27,500
8,000
$1,390,500
35,500
$1,426,000
BYP 3-3 MANAGERIAL ANALYSIS
(a) The unit cost of materials is $150 ($450,000 ÷ 3,000).
$150). Conversion costs, therefore, are $225,000 ($600,000 – $375,000),
and per unit conversion cost is $90 ($225,000 ÷ 2,500).
(c) There are 500 units in ending work–in–process inventory (3,000 started –
2,500 transferred out). The materials cost is $75,000 (500 X $150). Thus,
BYP 3-4 REAL-WORLD FOCUS
After mixing the gelatin and other materials, the mixture is heated, and
then spread on rolling drums which create thin gelatin ribbons. Each of
the ribbons then passes over a rotating die. The dies are designed so
that they can form round capsules. The dies press against each other
as they rotate. As the dies meet, both shells are filled with paint, which
Once the capsules are sealed they drop out of the machine to become
paintballs. They pass along a conveyor belt to a tumble drier, then onto
material”, crayon wax, and food coloring.
Labor: People would be needed run the various machines.
Overhead: Depreciation and maintenance of the various machines.
packing them.
(c) This would appear to be a perfect situation for the use of process
costing. Paintballs are a high volume product, and the paintballs are
very homogenous. While there may be some differences in various
BYP 3-5 COMMUNICATION ACTIVITY
To: Diane Barone, Regional Sales Manager
From: Student, Accounting Manager
Re: Production Cost Reports
I’ll try to clear up some of the questions you raised in your email. Here in
the Snack Foods Division we use process costing rather than the job order
system that Special Projects uses. The reason for this is that we produce
all our products in a more or less continuous process, even when we run
occasional special orders. You see, all our workers are assigned a particular
special orders are for various quantities of the foods we produce, so only
the Packing Department needs to be concerned with the particular set of
don’t have a “job” that we can record as “complete.” A batch may contain
enough of our product to fill thirty or more orders, so we may have thirty or
BYP 3-5 (Continued)
At the end of the month, we need to record what we finished and what still
remains undone. Equivalent units are the way we measure the amount of
work we have done on our work in process. It’s kind of like comparing the
contents of 4-ounce cups with the contents of 12–ounce cups. It doesn’t
15 minutes are “finished equivalents.” If we have enough pretzels to fill
30 bags, but we’ve only spent 5 minutes (or 1/3 of the total required) of labor
on them at the end of the month, we could have used the same amount
of time and completely finished 10 bags. Thus, we have the “equivalent” of
10 bags worth of labor.
ferred out of Process 1 are the same as the units and costs transferred in
to Process 2, and so on.
I hope this helps. Call, write, or email me any time!
BYP 3-6 ETHICS CASE
(a) The stakeholders in this situation are:
Jan Wooten, molding department head.
Tony Ferneti quality control inspector.
Customers of R. B. Dillman Company.
The department manager of the assembly department.
someone other than the department head. Tony should not report to Jan.
BYP 3-7 CONSIDERING CORPORATE SOCIAL RESPONSIBILITY
Bad publicity
Lost sales
Cost of cleaning up the affected area including transporting workers
to the site; housing workers near the site; per diem for cleanup
workers; safety equipment for the workers
Transportation and storage/disposal fees for any contaminants
Possible air/water testing for an extensive time following the accident
(b) Some steps that the company could have taken to reduce the environ–
mental failure costs include:
Install up to date safety equipment
Increase the frequency and efficacy of inspections