I need help in how to approach the following question:
Bicnell Corporation manufactures water skis through two processes. Molding and Packaging. In the Molding Department fiberglass is heated and shaped into the form of a ski. In the Packaging Department, the skis are placed in cartons and sent to the finishing goods warehouse. Materials are entered at the beginning of both processes. Labor and manufacturing overhead are incurred uniformly throughout each process. Production and cost data for the Molding Department for January 2008 are presented below.
Production Data January
Beginning work in process units -0-
Units started into production 35,000
Ending work in process units 5,000
Percent completed-ending inventory 40%
(a) Compute the physical units of production.
(b) Determine the equivalent units of production for materials and conversion costs.
(c) Compute the unit costs of production.
(d) Determine the costs to be assigned to the units transferred out and in process.
(e) Prepare a production cost report for the Molding Department for the month of January.
This is a guide on how one would approach such a question. Also see the attached MS Word document titled Bicnell Corporation Solution for complete problem solution.
Equivalent units of production measures the work done during the period, expressed in fully completed units. This amount is used to determine the cost per unit of completed product. Equivalent units of production are the sum of the units completed and transferred out and the equivalent units of ending work in process. The weighted-average method is one method used to compute equivalent units of production. This method considers the degree of completion or weight of the units completed and transferred out and the ending work in process. In computing equivalent units, the beginning work in process is not part of the equivalent units of production formula. Companies need to make two equivalent unit computations; one for materials, and the other for conversion costs. This is necessary because ending work in process is fully complete as to materials, but only partially complete as to conversion costs.
Companies prepare a production cost report for each department. Production cost reports provide a basis for evaluating the productivity of a department. Managers can use the cost data to assess whether unit costs and total costs are reasonable. In order to complete a production cost report, the company must perform four steps: (1) compute the physical unit flow (2) compute the equivalent units of production (3) compute unit ...
This solution is comprised of a Managerial Accounting problem that deals with the four steps necessary to prepare a production cost report. The topic includes the following:
Compute the physical units of production.
Determine the equivalent units of production for materials and conversion cost using the weighted-average method.
Compute the unit costs of production.
Determine the costs to be assigned to the units transferred out and in process.
Prepare a production cost report.
The calculation of equivalent units under the FIFO method is also compared and discussed.
The problem shown here is taken from Managerial Accounting, 4th ed., Wiley Publishing, however, the detail step-by-step explanation of the topic provides students with a clear understanding of the concepts. Thank you for using BrainMass.com. Have a great day!