Location via proxy:   [ UP ]  
[Report a bug]   [Manage cookies]                
Scribd Logo
Upload

Welcome to Scribd!

  • 205 views

    CMA Question 2

    Uploaded by

    Shifat sjt
    The document summarizes the physical units and costs for a forging department that uses a weighted average process costing method. It provides calculations of normal and abnormal spoilage at different inspection points and a weighted average process costing report with the costs of good units transferred out, abnormal spoilage costs, and ending work in process costs.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd

    CMA Question 2

    Uploaded by

    Shifat sjt
    205 views4 pages
    The document summarizes the physical units and costs for a forging department that uses a weighted average process costing method. It provides calculations of normal and abnormal spoilage at different inspection points and a weighted average process costing report with the costs of good units transferred out, abnormal spoilage costs, and ending work in process costs.

    Copyright

    © © All Rights Reserved

    Available Formats

    PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    The document summarizes the physical units and costs for a forging department that uses a weighted average process costing method. It provides calculations of normal and abnormal spoilage at different inspection points and a weighted average process costing report with the costs of good units transferred out, abnormal spoilage costs, and ending work in process costs.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    205 views4 pages

    CMA Question 2

    Uploaded by

    Shifat sjt
    The document summarizes the physical units and costs for a forging department that uses a weighted average process costing method. It provides calculations of normal and abnormal spoilage at different inspection points and a weighted average process costing report with the costs of good units transferred out, abnormal spoilage costs, and ending work in process costs.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 4

    Question 2: Lester Company makes metal products and has a forging department.

    In this
    department, materials are added at the beginning of the process and conversion takes place
    uniformly. At the start of November 2011, the forging department had 20,000 units in beginning
    work in process, which are 100% complete for materials and 40% complete for conversion costs.
    An additional 100,000 units are started in the department in November, and 30,000 units remain
    in work in process at the end of the month. These unfinished units are 100% complete for
    materials and 70% complete for conversion costs. The forging department had 15,000 spoiled
    units in November. Normal spoilage is 12% of good units.

    The department’s costs for the month of November are as follows:

    Beginning WIP Costs Incurred During Period


    Direct materials costs $ 64,000 $ 200,000
    Conversion costs 102,500 1,000,000

    1. Compute the normal and abnormal spoilage in units for November, assuming the inspection
    point is at (a) the 30% stage of completion, (b) the 60% stage of completion,
    and (c) the 100% stage of completion.
    2. Refer to your answer in requirement 1. Why are there different amounts of normal and
    abnormal spoilage at different inspection points?
    3. Now assume that the forging department inspects at the 60% stage of completion. Using the
    weighted average method, calculate the cost of units transferred out, the cost of abnormal
    spoilage, and the cost of ending inventory for the forging department in November.

    Solution:
    18-41 Physical units, inspection at various levels of completion, weighted average process
    costing report

    1.
    Inspection Inspection Inspection
    at 30% at 60% at 100%
    Work in process, beginning (40%)* 20,000 20,000 20,000
    Started during November 100,000 100,000 100,000
    To account for 120,000 120,000 120,000

    Good units completed and transferred out 75,000a 75,000a 75,000a


    Normal spoilage 10,200b 12,600c 9,000d
    Abnormal spoilage (15,000 – normal spoilage) 4,800 2,400 6,000
    Work in process, ending (70%)* 30,000 30,000 30,000
    Accounted for 120,000 120,000 120,000
    *Degree of completion for conversion costs at the dates of the work-in-process inventories
    a
    20,000 beginning inventory +100,000 –15,000 spoiled – 30,000 ending inventory = 75,000.
    b
    12%  (100,000 units started – 15,000 units spoiled) = 12%  85,000 = 10,200; beginning work-in-process
    inventory is excluded because it was already 40% complete at Nov 1 and past the inspection point.
    c
    12%  (120,000 units – 15,000 ) = 12%  105,000 = 12,600, because all units passed the 60% completion
    inspection point in November.
    d
    12%  75,000 = 9,000, because 75,000 units are fully completed and inspected during November.

    2. There are different amounts of normal and abnormal spoilage because the spoilage is detected
    at different points in the process. At the 30% inspection point, the beginning work in process
    inventory has already passed inspection and consists entirely of good units. At the 60%
    inspection point, the beginning work in process as well as units started this period must pass
    through the inspection point in the month of November. At the 100% inspection point, only
    the finished units have been inspected. Those in ending work in process have not yet been
    inspected. The finished units that are transferred out are good, but the others have not been
    inspected yet. Of course in all three cases the total spoilage is 15,000 units (given in the
    problem.)

    3. Solution Exhibit 18-41 summarizes total costs to account for, calculates the equivalent units of
    work done to date for each cost category, and assigns total costs to units completed (including
    normal spoilage), to abnormal spoilage, and to units in ending work in process using the
    weighted-average method.
    SOLUTION EXHIBIT 18-41
    Weighted-Average Method of Process Costing with Spoilage;
    Forging Department of Lester Company for November.

    PANEL A: Steps 1 and 2—Summarize Output in Physical Units and Compute Output in
    Equivalent Units

    (Step 1) (Step 2)
    Equivalent Units
    Physical Direct Conversion
    Flow of Production Units Materials Costs
    Work in process, beginning (given) 20,000
    Started during current period (given) 100,000
    To account for 120,000
    Good units completed and transferred out
    during current period: 75,000 75,000 75,000
    Normal spoilage (at 60% inspection pt)
    12,600  100%; 12,600  60% 12,600 12,600 7,560
    Abnormal spoilage (at 60% inspection pt)
    2,400  100%; 2,400 60% 2,400 2,400 1,440
    Work in process, ending‡ (given)
    30,000  100%; 30,000  70%a 30,000 30,000 21,000
    Accounted for
    Equivalent units of work done to date 120,000 120,000 105,000

    a
    Degree of completion in this department: direct materials, 100%; conversion costs, 70%.
    SOLUTION EXHIBIT 18-41

    PANEL B: Steps 3, 4, and 5— Summarize Total Costs to Account For, Compute Cost per
    Equivalent Unit, and Assign Total Costs to Units Completed, to Spoiled Units, and to Units
    in Ending Work in Process

    Total
    Production Direct Conversion
    Costs Materials Costs
    (Step 3) Work in process, beginning (given) $ 166,500 $ 64,000 $ 102,500
    Costs added in current period (given) 1,200,000 200,000 1,000,000
    Total costs to account for $1,366,500 $264,000 $1,102,500

    (Step 4) Costs incurred to date $264,000 $1,102,500


    Divided by equivalent units of work done to date 120,000 105,000
    Cost per equivalent unit $ 2.20 $ 10.50

    (Step 5) Assignment of costs


    Good units completed and transferred out (75,000 units)
    Costs before adding normal spoilage $ 952,500 (75,000  $2.20) + (75,000  10.50)
    Normal spoilage (12,600# units, 7560# units) 107,100 (12,600  2.20) + (7,560  10.50)
    (A) Total costs of good units completed and
    transferred out 1,059,600
    (B) Abnormal spoilage (2,400# units, 1,440# units) 20,400 (2,400#  2.20) + (1,440  10.50)
    (C) Work in process, ending (30,000# units, 21,000# units) 286,500 (30,000  2.20) + (21,000  10.50)
    $1,366,500 $264,000 + $1,102,500
    (A)+(B)+(C) Total costs accounted for

    #
    Equivalent units of direct materials and conversion costs calculated in Step 2 in Panel A above.

    You might also like