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Process Costing and Allocation

Process costing: determining equivalent units

In March 2006, Martinez Corporation's battery plant had 1,500 units in its beginning work in process inventory. During March, the company added 18,000 units to production. At the end of the month, 6,000 units of product were in process.

(each requirement is independent of the other)

a. Assuming the ending inventory units were 40 percent complete, determine the total number of equivalent units (number transferred out plus number in ending inventory) processed by the battery plant.

b. Assuming the total number of equivalent units (number transferred out plus number in ending inventory) processed by the battery plant was 15,000, what was the ending inventory percentage of completion?

Allocating cost in a process costing system

Gobin Corporation, a manufacturer of diabetic testing kits, started November production with $75,000 in beginning inventory. During the month, the company incurred $420,000 of materials cost and 240,000 of labor cost. It applied 165,000 of overhead cost to inventory. The company processed18,000 total equivalent units of product.

Each requirement is independent of the other

a. Assuming 3,000 equivalent units of product were in ending work in process inventory, determine the amount of cost transferred from the work in process inventory account to the finished goods inventory account. What was the cost of the ending work in process inventory?
b. Assuming 14,000 equivalent units of product were transferred from work in process inventory to finished goods inventory, determine the cost of the ending work in process inventory. What was the cost of the finished goods inventory transferred from work in process?

Process costing: determining equivalent units and allocating costs

Walker Corporation, which makes suitcases, completed 21,000 suitcases in August 2006. At the end of August work in process inventory consist of 3,000 suitcases estimated to be 40 percent complete. Total product cost for August amounted to $666,000.

a. Determine the cost per equivalent unit
b. Determine the cost of goods transferred to finished goods
c. Determine the cost of the ending work in process inventory

Process cost system

Cowboy Gifts makes unique western gifts that are sold at souvenir shops. One of the company's more popular products is a ceramic Eagle that is produced in a mass production process that entails two manufacturing stages. In the first production stage ceramic glass is heated and molded into the shape of the Eagle by the compression Department. Finally, color and artistic detail is applied to the Eagle by the Finishing Department. The company has just hired a new accountant who will be responsible for preparing the Cost of Production Report for June 2006. The accountant is given the following information from which to prepare his report.

Department Cost Information for June

Compression Finishing
Cost in beginning inventory $3,000 $14,400
Cost added during June:
Materials 42,000 18,120
Labor 20,000 13,200
Overhead 90,000 62,000

Departmental Product Information for June

Compression Finishing
Units in beginning inventory 5,000 1,800
Units started 26,000 23,000
Units in ending inventory 8,000 (25% complete) 4,800 (80% complete)

Required

a. Prepare a cost of production report for the Compression Department for June
b. Prepare a cost of Production Report for the Finishing Department for June
c. If 48,000 units are sold in June for $160,000, determine the company's gross margin for June.

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Solution Summary

The solution explains the calculation of equivalent units and cost allocation under process costing.

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