Q32PGA - Horngren'S Financial And Managerial Accounting

Question

Dee Electronics makes game consoles in three processes: assembly, programming, and packaging. Direct materials are added at the beginning of the assembly process. Conversion costs are incurred evenly throughout the process. The Assembly Department had no Work-in-Process Inventory on October 31. In mid-November, Dee Electronics started production on 100,000 game consoles. Of this number, 90,000 game consoles were assembled during November and transferred out to the Programming Department. The November 30 Work-in-Process Inventory in the Assembly Department was 35% of the way through the assembly process. Direct materials costing \(399,000 were placed in production in Assembly during November, direct labor of \)139,000 was assigned, and manufacturing overhead of $130,280 was allocated to that department.

Requirements

1. Prepare a production cost report for the Assembly Department for November.

The company uses the weighted-average method.

2. Prepare a T-account for Work-in-Process Inventory—Assembly to show its activity during November, including the November 30 balance.

 

Step-by-Step Solution

Answer

1. Production cost report

Production Cost Report for the Assembly Department for November
		Equivalent unit of production
UNITS	Physical units	Direct material	Conversion costs	Total
Units to account for:
Beginning WIP
Started in production	100,000
Total units to account for	100,000
Units accounted for:
Completed and transferred	90,000	90,000	90,000
Ending WIP	10,000	10,000	3,500
Total units accounted for	100,000	100,000	93,500
COSTS		Direct material	Conversion costs	Total costs
Costs to account for:
Beginning WIP
Cost added during the period		399,000	269,280	668,280
Total cost to account for		399,000	269,280	668,280
Divided by: total EUP		100,000	93,500
Cost per equivalent unit		$3.99	$2.88
Costs accounted for:
-       Completed and transferred out		359,100 (90,000 x $3.99)	259,200 (90,000x$2.88)	618,300
-       Ending WIP		39,900 (10,000x $3.99)	10,080 (3,500x$2.88)	49,980
Total costs accounted for		$399,000	$269,280	$668,280

 

2. The Ending balance of the WIP inventory account for the assembly department is $49,980

Step-by-Step Solution: Step 1: Production Cost Report

Production cost report is prepared by the companies using the process costing system while determining the total manufacturing cost. It shows the detailed costing of the products.

Step 2: Equivalent unit of production for conversion cost

$$\begin{gathered} \mathbf{Equivalent}\mathbf{ }\mathbf{unit}\mathbf{ }\mathbf{of}\mathbf{ }\mathbf{ }\mathbf{production}\mathbf{=}\mathbf{Ending}\mathbf{ }\mathbf{WIPunits}\mathbf{\times }\mathbf{Completion}\mathbf{\%} \\ \mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{=}\mathbf{10}\mathbf{,}\mathbf{000}\mathbf{\times }\mathbf{35}\mathbf{\%} \\ \mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{=}\mathbf{3}\mathbf{,}\mathbf{500} \end{gathered}$$

Step 3: T-account for work-in-process inventory-assembly

Particulars	Amount ($)	Particulars	Amount ($)
Beginning WIP		WIP-programming department	618,300
Direct material	399,000
Direct labor	139,000
Manufacturing overhead	130,280	Ending WIP	49,980