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Process Costing

Ortega Industries Inc. manufactures in separate processes furniture for homes. In each process, materials are entered at the beginning, and conversion costs are incurred uniformly. Production and cost data for the first process in making two products in two different manufacturing plants are as follows.

Cutting Department
Plant 1 Plant 2
Production Data-July T12-Tables C10-Chairs
Work in process units, July 1 -0- -0-
Units started into production 20,000 16,000
Work in process units, July 31 3,000 500
Work in process percent complete 60 80
Cost Data-July
Work in process, July 1 $ -0- $ -0-
Materials 380,000 288,000
Labor 234,400 125,900
Overhead 104,000 96,700
Total $718,400 $510,600

Complete four steps necessary to prepare a production cost report.

(a) For each plant:

1. Compute the physical units of production.

2. Compute equivalent units of production for materials and for conversion costs.

3. Determine the unit costs of production.

4. Show the assignment of costs to units transferred out and in process.

(b) Prepare the production cost report for Plant 1 for July 2008.

Solution Summary

The solution explains the calculation of equivalent units and preparation of production cost report