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Wizard’s Skateboard shop sells premium skateboards for use in skate parks. The shop uses a process-costing...
Wizard’s Skateboard shop sells premium skateboards for use in skate parks. The shop uses a process-costing system to compute the unit costs of the skateboards that it produces and sells for $450. Customers place orders online for skateboards where they can customize the decks and griptape with a choice of patterns and colours. The parts are purchased and assembled, customized with the customer’s choice of grip tape for the deck, trucks and wheels, and packaged to be sent by courier directly to the customer. Wizard’s Skateboard shop has three distinct departments: Assembly, Customization, and Packaging/Shipping.
The production process works as follows: all major parts have been assembled and the skateboard is tested before it is transferred from Assembly to Customization, the Customization department adds some materials to meet customer’s preference, and finally, the Packaging/Shipping department places the skateboard in a cardboard box and makes arrangements for shipping to the customer. Overhead in each department is applied based on direct labour costs at a rate of 130% for assembly and 115% for customization.
During March, the following results are available for the first two departments:
|
Assembly |
Customization |
|
|
Beginning inventories: |
||
|
Physical units |
22 skateboards |
15 skateboards |
|
Costs: |
||
|
Materials |
$4,600 |
$4,900 |
|
Labour |
$3,400 |
$4,250 |
|
Overhead |
? |
? |
|
Transferred in |
– |
$1,000 |
|
Current production: |
||
|
Transferred out |
220 skateboards |
240 skateboards |
|
Ending inventory |
14 skateboards |
12 skateboards |
|
Costs incurred in March: |
||
|
Materials |
$17,040 |
$1,300 |
|
Transferred in |
– |
? |
|
Labour |
$14,650 |
$1,180 |
|
Overhead |
? |
? |
|
Percentage of completion: |
||
|
Beginning inventory |
65% |
75% |
|
Ending inventory |
Material 50% |
Material 100% |
|
Conversion 50% |
Conversion 25% |
1. Physical flow analysis
2. Calculations of equivalent units
3. Calculation of unit costs
4. Valuation of inventories
5. Cost reconciliation
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Expert Solution
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| Wizard’s Skateboard | |
| Production report- Assembly | |
| Step 1. Physical flow analysis | |
| Units reconciliation | Whole Units |
| Beginning work in process inventory | 22.00 |
| Add: Units started in the month | 212.00 |
| Units to be account for | 234.00 |
| Units completed and transferred out | 220.00 |
| Add: Ending work in process inventory | 14.00 |
| Total Units accounted for | 234.00 |
| Step 2- Equivalent units of production | Whole Units | % Materials | EUP- Materials | % Conversion | EUP- Conversion |
| Units completed and transferred out | 220.00 | 100% | 220.00 | 100% | 220.00 |
| Ending work in process inventory | 14.00 | 50% | 7.00 | 50% | 7.00 |
| Equivalent units of production | 234.00 | 227.00 | 227.00 |
| Step 3- Costs per EUP | Materials | Conversion | Total Cost |
| Cost of beginning Inventory | 4,600.00 | 7,820.00 | 12,420.00 |
| Costs incurred during the month | 17,040.00 | 33,695.00 | 50,735.00 |
| Total cost to account for | 21,640.00 | 41,515.00 | 63,155.00 |
| Equivalent units of production | 227.00 | 227.00 | |
| Cost per Equivalent unit | 95.33 | 182.89 | 278.22 |
| Step 4- Valuation of inventories | |||
| Costs of units transferred out | EUP | Cost per EUP | Total Cost |
| Direct Materials | 220.00 | 95.33 | 20,973.00 |
| Conversion | 220.00 | 182.89 | 40,236.00 |
| Total transferred out | 61,209.00 | ||
| Costs of ending work in process | EUP | Cost per EUP | Total Cost |
| Direct Materials | 7.00 | 95.33 | 667.00 |
| Conversion | 7.00 | 182.89 | 1,281.00 |
| Total costs of ending work in process | 1,948.00 | ||
| Total costs accounted for | 63,157.00 |
| Step 5- Cost reconciliation | Amount $ |
| Total cost to account for | 63,155.00 |
| Total costs accounted for | 63,157.00 |
| Rounding off difference | (2.00) |
| Production report- Customization | |
| Step 1. Physical flow analysis | |
| Units reconciliation | Whole Units |
| Beginning work in process inventory | 15.00 |
| Add: Units started in the month | 237.00 |
| Units to be account for | 252.00 |
| Units completed and transferred out | 240.00 |
| Add: Ending work in process inventory | 12.00 |
| Total Units accounted for | 252.00 |
| Step 2- Equivalent units of production | Whole Units | % Transferred In | EUP- Transferred In | % Materials | EUP- Materials | % Conversion | EUP- Conversion |
| Units completed and transferred out | 240.00 | 100% | 240.00 | 100% | 240.00 | 100% | 240.00 |
| Ending work in process inventory | 12.00 | 100% | 12.00 | 100% | 12.00 | 25% | 3.00 |
| Equivalent units of production | 252.00 | 252.00 | 252.00 | 243.00 |
| Step 3- Costs per EUP | Transferred In | Materials | Conversion | Total Cost |
| Cost of beginning Inventory | 1,000.00 | 4,900.00 | 9,138.00 | 15,038.00 |
| Costs incurred during the month | 61,209.00 | 1,300.00 | 2,537.00 | 65,046.00 |
| Total cost to account for | 62,209.00 | 6,200.00 | 11,675.00 | 80,084.00 |
| Equivalent units of production | 252.00 | 252.00 | 243.00 | |
| Cost per Equivalent unit | 246.86 | 24.60 | 48.05 | 319.51 |
| Step 4- Valuation of inventories | |||
| Costs of units transferred out | EUP | Cost per EUP |
Total
Cost
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