Q39PGB - Horngren'S Financial And Managerial Accounting

Question

Mayhem 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 March 31. In mid-April, Mayhem Electronics started production on 99,000 game consoles. Of this number, 95,000 game consoles were assembled during April and transferred out to the Programming Department. The April 30 Work-in-Process Inventory in the Assembly Department was 45% of the way through the assembly process. Direct materials costing \(301,950 were placed in production in Assembly during April, direct labor of \)100,960 was assigned, and manufacturing overhead of $136,200 was allocated to that department.

Requirements

1. Prepare a production cost report for the Assembly Department for April. The

company uses the weighted-average method.

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

Step-by-Step Solution

Answer

1. Production cost report

		Equivalent unit of production
UNITS	Physical units	Direct material	Conversion costs	Total
Units to account for:
Beginning WIP
Started in production	99,000
Total units to account for	99,000
Units accounted for:
Completed and transferred	95,000	95,000	95,000
Ending WIP	4,000	4,000	1,800
Total units accounted for	99,000	99,000	96,800
COSTS		Direct material	Conversion costs	Total costs
Costs to account for:
Beginning WIP
Cost added during the period		$301,950	$237,160	539,110
Total cost to account for		301,950	237,160	539,100
Divided by: total EUP		99,000	96,800
Cost per equivalent unit		$3.05	$2.45
Costs accounted for:
-       Completed and transferred out		289,750 (95,000 x $3.05)	232,750 (95,000x$2.45)	522,500
-       Ending WIP		12,200 (4,000x $3.05)	4,410 (1,800x$2.45)	16,610
Total costs accounted for		$301,950	$237,160	539,110

2. The  Ending balance of the WIP inventory account for the assembly department is $16,610.

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

 A production cost report is a report of a manufacturing company that involves various manufacturing processes which shows the comprehensive costs of a product.

Step 2: Equivalent unit of production for conversion cost

$$\begin{gathered} \mathbf{Equivalent}\mathbf{ }\mathbf{unit}\mathbf{ }\mathbf{of}\mathbf{ }\mathbf{production}\mathbf{=}\mathbf{Ending}\mathbf{ }\mathbf{WIPunits}\mathbf{\times }\mathbf{Completion}\mathbf{\%} \\ \mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{=}\mathbf{4}\mathbf{,}\mathbf{000}\mathbf{\times }\mathbf{45}\mathbf{\%} \\ \mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{=}\mathbf{1}\mathbf{,}\mathbf{800} \end{gathered}$$

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

Particulars	Amount ($)	Particulars	Amount ($)
Beginning WIP		WIP-programming department	522,500
Direct material	301,950
Direct labor	100,960
Manufacturing overhead	136,200	Ending WIP	16,610