Company produces moulded beach widgets which they have traditionally sold for $1,200. All direct materials are added
Question:
Company produces moulded beach widgets which they have traditionally sold for $1,200. All direct materials are added at the beginning of production in the department, and conversion costs are incurred evenly throughout production. Inspection occurs when production is 100% completed. Normal spoilage is 10% of the total number of units started in the month. The business has never had a managerial accountant and they don't even know about process costing. Production manager expressed a concern about controlling spoilage and tracking the costs of bad product. Marketing manager asked about the spoilage and wondered if pricing should be adjusted when spoilage (or any other production costs) goes up or down in any month. They have never heard of FIFO and WA - and don't even know what the reports do for them or what information each provides. Purchasing manager - well we couldn't find the purchasing manager to ask their thoughts. Beginning inventory was 65% complete. Ending inventory is 40% complete.
Beginning inventories | |
Direct materials | $3,996,000 |
Conversion costs | $1,404,000 |
Costs added during current period | |
Direct materials | $30,458,400 |
Conversion costs | $18,303,900 |
Physical units | |
Units in beginning inventory | 7,200 |
Units started this month | 34,300 |
Total good units completed | 30,100 |
Total spoiled units for the month | 5,000 |
a) Prepare a spreadsheet that uses a data input box, calculates information necessary for a weighted average process cost report, and presents the cost report in an easily understood format and write out the journal entries for this period's work.
B) Copy the spreadsheet into a new range or new worksheet. If you use a new worksheet, highlight the tab and rename the worksheet “FIFO.” Now alter the weighted average calculations so that the spreadsheet uses data from the input box to calculate the information necessary for a FIFO process cost report and presents the cost report in an easily understood format.
C) Describe factors that would affect an accountant's choice of process costing method and make a recommendation for a process costing method for Rally. Explain your choice.
Horngrens Financial and Managerial Accounting
ISBN: 978-0133255584
4th Edition
Authors: Tracie L. Nobles, Brenda L. Mattison, Ella Mae Matsumura