Question

Tamar Co. manufactures a single product in one department. All direct materials are added at the beginning of the manufacturing process. Direct labor and overhead are added evenly throughout the process. The company uses monthly reporting periods for its weighted-average process cost accounting. During May, the company completed and transferred 22,200 units of product to finished goods inventory. Its 3,000 units of beginning goods in process consisted of $19,800 of direct materials, $123,300 of direct labor, and $98,640 of factory overhead. It has 2,400 units (100% complete with respect to direct materials and 80% complete with respect to direct labor and overhead) in process at month-end. After entries to record direct materials, direct labor, and overhead for May, the company’s Goods in Process Inventory account follows.


Required
1. Prepare the company’s process cost summary for May using the weighted- average method.
2. Prepare the journal entry dated May 31 to transfer the cost of completed units to finished goods inventory.
Analysis Components
3. The cost accounting process depends on numerous estimates.
a. Identify two major estimates that determine the cost per equivalent unit.
b. In what direction might you anticipate a bias from management for each estimate in part 3a (assume that management compensation is based on maintaining low inventory amounts)? Explain youranswer.


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  • CreatedNovember 29, 2013
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