Question

In: Accounting

Pureform, Inc., uses the weighted-average method in its process costing system. It manufactures a product that...

Pureform, Inc., uses the weighted-average method in its process costing system. It manufactures a product that passes through two departments. Data for a recent month for the first department follow:

Units Materials Labor Overhead
Work in process inventory, beginning 79,000 $ 99,000 $ 34,200 $ 46,700
Units started in process 749,000
Units transferred out 770,000
Work in process inventory, ending 58,000
Cost added during the month $ 1,297,800 $ 523,355 $ 598,120

The beginning work in process inventory was 80% complete with respect to materials and 65% complete with respect to labor and overhead. The ending work in process inventory was 60% complete with respect to materials and 50% complete with respect to labor and overhead.

Required:

Assume that the company uses the FIFO method in its process costing system.

1. Compute the first department's equivalent units of production for materials, labor, and overhead for the month.

2. Compute the first department's cost per equivalent unit for materials, labor, overhead, and in total for the month. (Round your answers to 2 decimal places.)

.

Madison Park Co-op, a whole foods grocery and gift shop, has provided the following data to be used in its service department cost allocations:

Service Departments

Operating Departments

Administration Janitorial Groceries Gifts
Departmental costs before allocations $200,000 $60,000 $3,820,000 $340,000
Employee-hours 480 310 2,720 170
Space occupied—square feet 600 1,300 9,400 600


Required:

Using the step-down method, allocate the costs of the service departments to the two operating departments. Allocate Administration first on the basis of employee-hours and then Janitorial on the basis of space occupied. (Please enter allocations from a department as negative and allocations to a department as positive. The line should add across to zero. Do not round intermediate calculations. Round your answers to the nearest whole dollar amount.)

Solutions

Expert Solution

Soluiton:

1) Calculation of the First Department's Equivalent Units of Production for Materials, Labor and Overhead for the Month:

Particulars Units Direct Materials Labor Overhead
% E.U % E.U % E.U
Work in Process Inventory, Beginning 79,000 (100% - 80%) = 20% 15,800 (100% - 65%) = 35% 27,650 (100% -65%) = 35% 27,650
Less: Units Started and Completed 691,000 100% 691,000 100% 691,000 100% 691,000
Add: Work in process inventory, ending 58,000 60% 34,800 50% 29,000 50% 29,000
Equivalent Units 741,600 747,650 747,650

Calculation of the first department's cost per equivalent unit for materials, labor, overhead, and in total for the month:

Particulars Materials Labor Overhead
Costs added during Month (a) $1,297,800 $523,355 $598,120
Equivalent Units (b) 741,600 747,650 747,650
Cost Per Equivalent Units (a)/(b) $1.75 $0.70 $0.80

2) Using the Step-Down Method, Allocating the Costs of the Service departments to the Two Operating Departments:

Allocation of Service Departments Costs
Service Departments Operating Departments
Administration Janitorial Groceries Gifts
Departmental costs before allocations $200,000 $60,000 $3,820,000 $340,000
Allocation of Administration Cost ($200,000) $19,375 $170,000 $10,625
Departmental Costs After Allocation of Administration Costs $0 $79,375 $3,990,000 $350,625
Allocation of Janitorial Costs ($79,375) $74,613 $4,762
Total Cost After Allocation $0 $0 $4,064,613 $355,387

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