Q42PGB - Horngren'S Financial And Managerial Accounting

Question

Casey Carpet manufactures broadloom carpet in seven processes: spinning, dyeing, plying, spooling, tufting, latexing, and shearing. In the Dyeing Department, direct materials (dye) are added at the beginning of the process. Conversion costs are incurred evenly throughout the process. Information for July 2018 follows:

UNITS
Beginning work-in-process inventory	75 rolls
Transferred in from spinning department during July	590 rolls
Completed during July	550 rolls
Ending work in process inventory (80% complete for conversion work)	115 rolls
COSTS
Beginning work in process inventory (transferred in costs, \(3,700, material costs, \)1,450 conversion costs, \(4,950)	\)10,100
Transferred in from the spinning department	21,570
Material costs added during July	11,185
Conversion costs added during July (Manufacturing wages, \(8,050; manufacturing overhead allocated, \)45,422)	53,472

Requirements

1. Prepare a production cost report for Casey’s Dyeing Department for July. The

company uses the weighted-average method.

2. Journalize all transactions affecting Casey’s Dyeing Department during July, including the entries that have already been posted. Assume labor costs are accrued and not yet paid.

Step-by-Step Solution

Answer

1. Production cost report

		Equivalent unit of production
UNITS	Physical units	Transferred in	Direct material	Conversion costs	Total
Units to account for:
Beginning WIP	75
Transferred in from spinning department	590
Total units to account for	665
Units accounted for:
Completed and transferred	550	550	550	550
Ending WIP	115	115	115	92
Total units accounted for	665	665	665	642
COSTS		Transferred in	Direct materials	Conversion costs	Total costs
Costs to account for:
Beginning WIP		$3,700	$1,450	$4,950	$10,100
Cost added during the period		21,570	11,185	53,472	86,227
Total cost to account for		25,270	12,635	58,422	96,327
Divided by: total EUP		665	665	642
Cost per equivalent unit		$38	$19	$91
Costs accounted for:
Completed and transferred out		20,900 (550 x $38)	10,450 (550x$19)	50,050 (550x$91)	81,400
Ending WIP		4,370 (115x $38)	2,185 (115x$19)	8,372 (92x$91)	14,927
Total costs accounted for		25,270	12,635	58,422	96,327

2. Showing in step 5 the journal entries affecting Casey’s dyeing department during July.

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 transferred in

$$\begin{gathered} \mathbf{EUP}\mathbf{ }\mathbf{for}\mathbf{ }\mathbf{Transferred}\mathbf{ }\mathbf{in}\mathbf{=}(\mathbf{Completed}\mathbf{ }\mathbf{units}\mathbf{\times }\mathbf{Completion}\mathbf{\%})\mathbf{+}(\mathbf{Ending}\mathbf{ }\mathbf{WIP}\mathbf{ }\mathbf{units}\mathbf{\times }\mathbf{Completion}\mathbf{\%}) \\ \mathbf{=}(\mathbf{550}\mathbf{\times }\mathbf{100}\mathbf{\%})\mathbf{+}(\mathbf{115}\mathbf{\times }\mathbf{100}\mathbf{\%}) \\ \mathbf{=}\mathbf{665} \end{gathered}$$

Step 3: Equivalent unit of production for direct material

$$\begin{gathered} \mathbf{EUP}\mathbf{ }\mathbf{for}\mathbf{ }\mathbf{Direct}\mathbf{ }\mathbf{material}\mathbf{=}\mathbf{(}\mathbf{Completed}\mathbf{ }\mathbf{units}\mathbf{\times }\mathbf{Completion}\mathbf{\%}\mathbf{)}\mathbf{+}\mathbf{(}\mathbf{Ending}\mathbf{ }\mathbf{WIPunits}\mathbf{\times }\mathbf{Completion}\mathbf{\%}\mathbf{)} \\ \mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{=}\mathbf{(}\mathbf{550}\mathbf{\times }\mathbf{100}\mathbf{\%}\mathbf{)}\mathbf{+}\mathbf{(}\mathbf{115}\mathbf{\times }\mathbf{100}\mathbf{\%}\mathbf{)} \\ \mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{=}\mathbf{665} \end{gathered}$$

Step 4: Equivalent unit of production for conversion costs

$$\begin{gathered} \mathbf{EUP}\mathbf{ }\mathbf{for}\mathbf{ }\mathbf{Conversion}\mathbf{ }\mathbf{cost}\mathbf{=}(\mathbf{Completed}\mathbf{ }\mathbf{units}\mathbf{\times }\mathbf{Completion}\mathbf{\%})\mathbf{+}(\mathbf{Ending}\mathbf{ }\mathbf{WIPunits}\mathbf{\times }\mathbf{Completion}\mathbf{\%}) \\ \begin{array}{c}\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{=}(\mathbf{550}\mathbf{\times }\mathbf{100}\mathbf{\%})\mathbf{+}(\mathbf{115}\mathbf{\times }\mathbf{80}\mathbf{\%})\\ =642\end{array} \end{gathered}$$

Step 4: Journal entries

Date	Particulars	Debit ($)	Credit ($)
1.	WIP inventory – Dyeing department	21,570
	WIP inventory – Spinning department		21,570
2.	WIP inventory – Dyeing department	11,185
	Raw material		11,185
3.	WIP inventory – Dyeing department	8,050
	Wages payable		8,050
4.	WIP inventory – Dyeing department	45,422
	Manufacturing overhead		45,422
5.	WIP inventory – plying department	81,400
	WIP inventory – Dyeing department		81,400