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Assignment 2

The document provides information for two accounting problems involving job order costing and process costing. [1] For job order costing, various manufacturing costs are provided to prepare a statement of cost of goods manufactured and net income, showing a cost of goods manufactured of $473,000 and net income of $141,500. [2] For process costing using the weighted average method, calculations show equivalent units of production as 30,000, a cost per equivalent unit of $3.95, a total cost transferred out of $102,700, and an ending work-in-process inventory cost of $15,800.

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Sahil Kumar
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46 views

Assignment 2

The document provides information for two accounting problems involving job order costing and process costing. [1] For job order costing, various manufacturing costs are provided to prepare a statement of cost of goods manufactured and net income, showing a cost of goods manufactured of $473,000 and net income of $141,500. [2] For process costing using the weighted average method, calculations show equivalent units of production as 30,000, a cost per equivalent unit of $3.95, a total cost transferred out of $102,700, and an ending work-in-process inventory cost of $15,800.

Uploaded by

Sahil Kumar
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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ASSIGNMENT – 2

5% IN THE FINAL GRADE


DUE before October 22nd , 2022 @11.59 PM
Problem:1 (JOB ORDER COSTING)
The Collins Company uses a job-order costing system and applies manufacturing overhead cost
to jobs on the basis of the cost of materials used in production. At the beginning of the most
recent year, the following estimates were made as a basis for computing the predetermined
overhead rate for the year:

   
The following transactions took place during the year (all purchases and services were acquired
on account):
a.) Raw materials purchased: $86,000.
b.) Raw materials requisitioned for use in production (all direct materials): $98,000.
c.) Utility costs incurred in the factory: $15,000.
d.) Salaries and wages incurred as follows:

   
e.) Maintenance costs incurred in the factory: $15,000.
f.) Advertising costs incurred: $89,000.
g.) Depreciation recorded for the year: $80,000, of which 80% relates to factory assets and the
remainder relates to selling and administrative assets.
h.) Rental cost incurred on buildings: $70,000 (75% of the space is occupied by the factory, and
25% is occupied by sales and administration).
i.) Miscellaneous selling and administrative costs incurred: $11,000.
j.) Manufacturing overhead cost was applied to jobs as per company policy.
k.) Cost of goods manufactured for the year: $500,000.
l.) Sales for the year (all on account): $1,000,000. These goods cost $600,000 to manufacture.

Required:

Prepare statement of cost of goods manufactured and net income.


Problem.2. (PROCESS COSTING)
.  Dita Company uses a process costing system. The following information relates to one month's
activity in the company's Curing Department:

   

The conversion cost of the beginning inventory was $6,500. During the month, $112,000 in
additional conversion cost was incurred.

Required:

Assume that the company uses the WEIGHTED AVERAGE method. Compute the following:

1. The equivalent units of production for conversion for the month.


2. The cost per equivalent unit for conversion for the month.
3. The total cost transferred out during the month.
4. The cost assigned to the ending work-in-process inventory.
SOLUTIONS

Solution 1:- Statement of cost of good manufactured


DIRECT MATERIAL (a) 98000
DIRECT LABOUR (b) 175000
MANUFACTURING OVERHEAD APPLIED (c) 200000
TOTAL MANUFACTURING COST (d= 473000
a+b+c)
Add: Beginning work in process (e) 0
Less: Ending work in process (f) 0

COST OF GOODS MANUFACTURED (g= d+e+f) 4,73,000

NET INCOME –
SALES 1000000
Less: Cost of good sold (Adjusted) (600000)
Goods Margin (A) 400000
Less: Selling & Administration Expenses
Administration Salaries 125000
Advertising cost 89000
Depreciation 16000
Rental cost 17500
Miscellaneous Expenses 11000
Total Expenses (B) 258500

NET INCOME (A+B) 1,41,500

Solution 2:- WEIGHTED AVERAGE METHOD


1. UNITS TRANSFERRED OUT + Equivalent units in ending inventory (5000*80%)

Equivalent unit of production = 26000 + 4000 = $ 30000.

2. Cost per equivalent unit for conversion-


Cost in opening inventory + cost incurred during period = Total cost
6500 + 112000 = 118500

$ 118500 / 30000 EUs = $ 3.95 per EU.

3. Total cost transferred out during month-


26000 units * 3.95 per EU
= $ 102700.
4. Cost assigned to ending work in progress inventory-
5000 * 80% * $ 3.95 per EU
= $ 15800.

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