Question

In: Accounting

Gamma Manufacturing Co. Ltd. makes a product by way of three consecutive processes. The following data...

Gamma Manufacturing Co. Ltd. makes a product by way of three consecutive processes. The following data relates to process 2 for the month of May.

(i) During May, 1,500 units valued at $226.50 each were transferred from process 1 to process 2.

(ii) Other costs incurred during the month were:

Direct material added   $114,750

Direct manufacturing wages $124,850

Manufacturing overheads   $158,250

(iii) 200 units were scrapped during the period. Normal losses were estimated to be 81/3% of input during the period. The scrap value of any loss is $78.00 per unit.

(iv) Work-in-progress at the end of May was 400 units and had reached the following degree of completion:   

Transfer from process 1 100%   

Direct material added     75%   

Direct manufacturing wages    40%   

Production overhead     20%

(v) There were no unfinished goods in process 2 at the beginning of the period.

Required:

(a) Prepare a statement of equivalent production to determine the equivalent units and conversion costs and the cost per equivalent unit for direct materials (From Process 1 & Direct Material Added), Manufacturing Wages & Manufacturing Overhead.

(b) Calculate the:

- Total cost of feed completed and transferred to Process 3

- Cost of abnormal losses

- Cost of ending work-in-process inventory in Process 2    

(c) Prepare the Work-In-Process Inventory - Process 2 T-account, clearly showing the ending balance.            
(d) State the journal entries necessary to record the assignment of direct materials, direct manufacturing wages and manufacturing overhead applied to Process 2. Also give the journal entries to record the cost of product completed and transferred to Process 3.

Solutions

Expert Solution

a)

WN1: Completed Units = Total Input - Scrap Units - Closing WIP units

1,500 - 200 - 400 = 900 Units

WN2: Abnormal Loss = Scrap Units - Normal Loss

200 - (1,500 X 81/3%) = 200 - 125 = 75 Units

(b)(1) Cost of feed completed and transferred to Process 3: Total Cost per Equivalent Unit X No. of Units transferred

590 X 900 = 531,000

(b)(2) Cost of Abnormal Loss:  Total Cost per Equivalent Unit X Abnormal Loss Units

590 X 75 = 44,250

Net Abnormal Loss : Cost of Abnormal Loss - Scrap Value of Abnormal Loss Units

44,250 - (75 X 78) = 44,250 - 5850 = 38,400

(b)(3) Cost of ending work-in-progress inventory in Process 2:

(c) Wrok in Process Inventory - Process 2 T-Account:

(d) Journal Entries:


Related Solutions

Gamma Manufacturing Co. Ltd. makes a product by way of three consecutive processes. The following data...
Gamma Manufacturing Co. Ltd. makes a product by way of three consecutive processes. The following data relates to process 2 for the month of May. (i) During May, 1,500 units valued at $226.50 each were transferred from process 1 to process 2. (ii) Other costs incurred during the month were: Direct material added                         $114,750 Direct manufacturing wages               $124,850 Manufacturing overheads                   $158,250 (iii) 200 units were scrapped during the period. Normal losses were estimated to be 81/3% of input...
Product Cost Report—Weighted Average Method Riley Manufacturing Corporation produces a cosmetic product in three consecutive processes....
Product Cost Report—Weighted Average Method Riley Manufacturing Corporation produces a cosmetic product in three consecutive processes. The costs of Department 1 for May 2019 were as follows: Cost of beginning inventory Direct material $9,800 Conversion costs 16,480 Costs added in Department 1: Direct material $295,120 Direct labor 298,550 Manufacturing overhead 203,130 796,800 Department 1 handled the following units during May: Units in process, May 1, 2019 2,000 Units started in Department 1 40,000 Units transferred to Department 2 39,000 Units...
Product Cost Report—Weighted Average Method Reston Manufacturing Corporation produces a cosmetic product in three consecutive processes....
Product Cost Report—Weighted Average Method Reston Manufacturing Corporation produces a cosmetic product in three consecutive processes. The costs of Department 1 for May 2016 were as follows: Cost of beginning inventory Direct material $24,500 Conversion costs 41,475 Costs added in Department 1 Direct material $738,500 Direct labor 746,375 Manufacturing overhead 507,825 1,992,700 Department 1 handled the following units during May: Units in process, May 1 2,000 Units started in Department 1 40,000 Units transferred to Department 2 39,000 Units in...
Product Cost Report—Weighted Average Method Reston Manufacturing Corporation produces a cosmetic product in three consecutive processes....
Product Cost Report—Weighted Average Method Reston Manufacturing Corporation produces a cosmetic product in three consecutive processes. The costs of Department 1 for May 2016 were as follows: Cost of beginning inventory Direct material $19,600 Conversion costs 33,180 Costs added in Department 1 Direct material $590,800 Direct labor 597,100 Manufacturing overhead 406,260 1,594,160 Department 1 handled the following units during May: Units in process, May 1 2,000 Units started in Department 1 40,000 Units transferred to Department 2 39,000 Units in...
Salanger Manufacturing Corporation produces a dandruff shampoo in three consecutive processes. The costs of Department 1...
Salanger Manufacturing Corporation produces a dandruff shampoo in three consecutive processes. The costs of Department 1 for June 2019 were as follows: Cost of beginning inventory Direct material $5,500 Conversion costs 12,740 Costs added in Department 1: Direct material $223,390 Direct labor 358,300 Manufacturing overhead 155,269 736,959 Department 1 handled the following units during June: Units in process, June 1 2,000 Units started in Department 1 45,000 Units transferred to Department 2 46,000 Units in process, June 30 1,000 On...
Home & Gardening Depot makes decorative flower pots using three consecutive processes: Moulding, Baking & Spraying....
Home & Gardening Depot makes decorative flower pots using three consecutive processes: Moulding, Baking & Spraying. Costs incurred in the Baking Department during June are summarized as follows: June 1 bAL $0 ........................................... From Moulding 2000 665,200 Direct Material Added 195,200 Direct Manufacturing wages 204,240 Manufacturing Overhead Applied 306,360 Normal losses are estimated to be 5% of input during the period. Inspection takes place during the processing operation, at which point bad units are separated from good units and sold...
Home & Gardening Depot makes decorative flower pots using three consecutive processes: Moulding, Baking & Spraying....
Home & Gardening Depot makes decorative flower pots using three consecutive processes: Moulding, Baking & Spraying. Costs incurred in the Baking Department during June are summarized as follows: WIP – Process 2 A/C Debit Credit June 1 bAL $0 From Moulding    2000 $665,200 Direct Material Added    $195,200 Direct Manufacturing wages    $204,240 Manufacturing Overhead Applied    $306,360 Normal losses are estimated to be 5% of input during the period. Inspection takes place during the processing operation, at which...
Leona’s makes decorative flower pots using three consecutive processes: Moulding, Baking & Spraying. Costs incurred in...
Leona’s makes decorative flower pots using three consecutive processes: Moulding, Baking & Spraying. Costs incurred in the Baking Department during June are summarized as follows: WIP – Process 2 A/C June 1 Bal.                                                                      0 From Moulding                                2,000                    665,200 Direct Materials Added                                                195,200 Direct Manufacturing Wages                                     204,240 Manufacturing Overhead Applied                          306,360                               Normal losses are estimated to be 5% of input during the period. Inspection takes place during the processing operation, at which point bad...
Hart Manufacturing makes three products. Each product requires manufacturing operations in three departments: A, B, and...
Hart Manufacturing makes three products. Each product requires manufacturing operations in three departments: A, B, and C. The labor-hour requirements, by department, are as follows: Department Product 1 Product 2 Product 3 A 1.50 3.00 2.00 B 2.00 1.00 2.50 C 0.25 0.25 0.25 During the next production period the labor-hours available are 450 in department A, 350 in department B, and 50 in department C. The profit contributions per unit are $25 for product 1, $28 for product 2,...
Hart Manufacturing makes three products. Each product requires manufacturing operations in three departments: A, B, and...
Hart Manufacturing makes three products. Each product requires manufacturing operations in three departments: A, B, and C. The labor-hour requirements, by department, are as follows: Department Product 1 Product 2 Product 3 A 3.00 2.00 1.50 B 1.00 2.50 2.00 C 0.25 0.25 0.25 During the next production period the labor-hours available are 450 in department A, 350 in department B, and 50 in department C. The profit contributions per unit are $28 for product 1, $30 for product 2,...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT