In: Accounting
Don’t Cry Over Spilled Milk, Inc., a manufacturer of mops, uses the weighted average method in its processing costing system. The company uses a departmental costing system to allocate manufacturing overhead (MOH) to production. Production in the company's first processing department, Machining, is highly automated. As such, machine hours are used as the allocation base in the department.
At the beginning of the year, the company estimated that its total MOH would be $400,000; 87.5% of which was expected to be generated in the Machining department. The Machining department was expected to log 100,000 machine hours during the year. The following data related to the operations in Machining during June 2018:
Beginning Work in Process |
650 mops, 60% complete with respect to all product costs |
Costs in Beginning Work in Process |
$2,524 |
Units Started in June |
14,200 mops |
Direct Product Costs Added During June |
direct materials $47,000; direct labor $124,000 |
Ending Work in Process |
400 mops, 70% complete with respect to all product costs |
During June, 8,500 actual machine hours were logged during production.
The cost to assemble one mop in June was
A.
$19.87
B.
$13.80
C.
$19.67
D.
$11.78
E.
$13.77
UNITS TO ACCOUNT FOR: | |||||
Beginning Work in Process units | 650 | ||||
Add: Units Started in Process | 14,200 | ||||
Total Units to account for: | 14,850 | ||||
UNITS TO BE ACCOUNTED FOR: | |||||
Units started and completed | 14,450 | ||||
Ending Work in Process | 400 | ||||
Total Units to be accounted for: | 14,850 | ||||
Equivalent Units: | |||||
Total Equivalent units | |||||
% Completion | Units | ||||
Units started and completed | 100% | 14,450 | |||
Ending Work in Process | 80% | 280 | |||
Total Equivalent units | 14,730 | ||||
TOTAL COST TO ACCOUNT FOR: | |||||
Total | |||||
Beginning work in Process | 2,524 | ||||
Cost Added during May | |||||
Material | 47,000 | ||||
Direct labour | 124000 | ||||
OH (8500*3.50) | 29750 | ||||
Total cost added during the year | 203,274 | ||||
Equivalent Units | 14,730 | ||||
Cost per Equivalent unit | 13.8 | ||||
Note: | |||||
OH rate: | |||||
estimated OH of deptt (400000*87.50%) | 350000 | ||||
divide: MH | 100000 | ||||
OH rate per MH | 3.5 | ||||
Answer is B. 13.80 | |||||