In: Accounting
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.)
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 |