Vous êtes sur la page 1sur 9

Mymie B.

Maandig MBA-1
Dr. Marco Ilano

Problem 4-13A
Required
1.Compute the equivalent units production

Equivalent units of production

Units transferred to the next department = Units in beginning work in process + Units
started into production Units in ending work in process = 70,000 + 350,000 40,000
= 380,000
Materials Conversion
Transferred to next 380,000 380,000
department
Ending work in
process:
Materials: 40,000 30,000
units 75% complete
Conversion: 40,000 10,000
units 25% complete

Equivalent units of 410,000 390,000


production

2. Compute the costs per equivalent unit for the month


Cost per equivalent unit

Materials Conversion
Cost of beginning work $ 86,000 $ 36,000
in process
Cost added during the 447,000 198,000
period

Total cost (a) $ 533,000 $ 234,000


Equivalent units of 410,000 390,000
production (b)
Cost per equivalent unit, $ 1.30 $ 0.60
(a) (b)

3. Determine the cost of ending work in process inventory and of the units
transferred out to the next department.
Cost of ending work in process inventory and units transferred out

Materials Conversion Total


Ending work in
process inventory:
Equivalent units 30,000 10,000
of production
(materials: 40,000
units 75%
complete;
conversion:
40,000 units 25%
complete)
Cost per $ 1.30 $ 0.60
equivalent unit
Cost of ending $ 39,000 $ 6,000 $ 45,000
work in process
inventory
Units completed
and transferred out:
Units transferred 380,000 380,000
to the next
department
Cost per $ 1.30 $ 0.60
equivalent unit
Cost of units $ 494,000 $ 228,000 $ 722,000
completed and
transferred out
4. Prepare a cost reconciliation report for the month
Cost of beginning work in process inventory ($86,000 + $36,000) = $122,000
Costs added to production during the period ($447,000 + $198,000) = $645,000

Cost Reconciliation
Costs to be accounted for:

Cost of beginning work in process inventory $ 122,000


Costs added to production during the period 645,000
Total costs to be accounted for 767,000

Costs accounted as follows:


Cost of ending work in process inventory $ 45,000
Cost of unit completed and transferred out 722,000
Total cost accounted for 767,000

Problem 4-18A

Required

1. Units started and completed during May


Total units transferred to the next department 30,000
Less units in the May 1 inventory 5,000
Units started and completed in May $ 25,000

2. Equivalent units for May for materials and


conversion costs.
Materials Conversion
Transferred to the next department 30,000 30,000
Ending work in process:
Materials: 40,000 units x 75% 3,000
complete
Conversion: 7,600 units x 50% 2,000
complete
Equivalent units of production $ 33,000 $ 32,000

3. Costs per equivalent unit for May


Materials Conversion Total
Work in process, May 1 $ 9,000 $ 4,400 $ 13,400
Costs added during May $ 57,000 $ 30,800 $ 87,800

Materials Conversion
Cost of beginning work in process $ 9,000 4,400
Cost added during the period 57,000 30,800
Total cost (a) $ 66,000 35,200
Equivalent Units of production (b) 33,000 32,000
Cost per equivalent unit, (a/b) $2 $ 1.1

4. Verifying the accountants ending work in process inventory figure ($8,200) given
in the report
Materials Conversion Total
Ending work on process inventory:
Equivalent units of production 3,000 2,000
Cost per equivalent unit $2 $ 1.1
Cost of ending work in process $ 6,000 $ 2,200 $ 8,200
inventory

5. Will this method yield a valid estimate of incremental cost? Explain


Materials Conversion Total
Cost of beginning work in process $ 9,000 4,400 13,400
Cost added during the period 57,000 30,800 87,800
Total cost (a) $ 66,000 35,200 $ 101,200
Equivalent Units of production (b) 33,000 32,000
Cost per equivalent unit, (a/b) $2 $ 1.1 $ 3.10

Multiplying the unit cost figure of 3.10 per unit by 1,000 units does not provide a valid
estimate of the incremental cost of processing an additional 1,000 units through the
department. If there is sufficient idle capacity to process an additional 1,000 units, the
incremental cost per unit is almost certainly less than 3.10 per unit because the
conversion costs are likely to include fixed costs.
Analytical Thinking

Required

1. Prepare a report for the Forming Department for October showing how much
cost should have been assigned to the units completed and transferred to the
Stamping Department and to the ending work in process inventory.

Durall Company
Forming Department Cost of Production Report
Weighted Average and FIFO Process Costing Methods
For the Month of October

Equivalent Units
Physical Trans -In D/M Conversion
Flow
Degree of Completion
Units to Account for Trans D/M Conversion
-In
BWIP 100 100% 87.5% 8,000
%
Transferred- In from 97,000
previous dept.
Total 105,000
Units Accounted for:
Completed units 100,000
From BWIP 0% 0% 12.5% 8,000 0 0 1,000
Started and Completed 100 100% 100.0% 92,000 92,000 92,000 92,000
%
EWIP 100 0% 40% 5,000 5,000 0 2,000
%
Total 105,000
Calculations of Equivalent
Units
FIFO Equivalent Units 97,000 92,000 95,000
Plus BWIP EU from 8,000 8,000 7,000
previous period
Weighted Average 105,000 100,000 102,000
Equivalent Units

Cost to account for: Trans- In D/M Conversion Total


BWIP $8,820 $3,400 $10,200 $22,420
Current Costs Added 81,480 27,600 96,900 205,980
this Period
Total $90,300 $31,000 $107,100 $228,400
Cost per Equivalent Unit
Weighted Average $0.860 $0.310 $1,050 $2.220
Cost accounted for :
Weighted Average Method
Cost associated w/ $86,000 $31,000 $105,000 $222,000
Completed Units
Cost assigned to EWIP
Units
Transferred- In $4,300 $4,300
Costs
D/M Costs $0 $0
Conversion Costs $2,100 $2,100
Total $4,300 $0 $2,100 $6,400
Total Cost Accounted for $90,300 $31,000 $107,100 $228,400

2. Explain to the president why the unit cost appearing on the report prepared by the accountant
is so high.

None of the manufacturing costs were assigned to EWIP inventory by the company's accountant.

Ethics Challenge

Required

1. Jean Jackson estimated that the units in ending inventory in the final processing department
were 25% complete with respect to the conversion costs of the final processing department. If,
this estimate of the percentage completion is used, what would be the cost of goods sold for the
year?

This department is the last processing department, units transferred into this department:270,000
units and Units completed and sold: 250,000 units

Equivalent units of production

Transferred In Conversion
Units completed and sold 250,000 250,000
EWIP 20,000 20000*0.25=5,000
Equivalent Units and 270,000 255,000
production

Cost per equivalent unit

Transferred In Conversion
Cost of BWIP 0 0
Costs added during the period 49,221,000 16,320,000
Total cost 49,221,000 16,320,000
Equivalent Unit 270,000 255,000
Cost per equivalent unit 182.3 64
Cost of goods sold = (182.3+64)x250,000

= 61,575,000

2. Does Thad Kostowski want the estimated percentage completion to be increased or decreased?
Explain why?
The division is short of 62,500 dollars of profit. So, in order to meet the target profit of the year,
the profit must be increased. In order to achieve that, we must act on the cost of goods sold by
decreasing them and that's where the estimate of the percentage completion of ending work in process
inventories comes in. This percentage affects the unit costs of finished goods and therefore the cost of
goods sold.

To be able to lower unit costs, equivalent units must be higher, consequently, percentage
completion of the ending work in process must be increased.

3. What percentage completion would result in increasing the reported net operating income by
$62,500 over the net operating income that would be reported if the 25% figure were used?

In order to increase the reported net operating income by $62,500 over the net operating income
that would be reported, we must decrease the cost of goods sold by $62,500.

We have cost of goods sold= Cost per equivalent unit x units completed and sold

We are looking for the cost per equivalent unit:

Cost of goods sold= X x units completed and sold

61,575,000-62,500= (182.30+X) x 250,000

(182.30 + X) x 250,000= 61,575,000-62,500

(182.30 + X) x 250,000= 61,512,500

(182.30 + X)= 246.05

X= 63.75

What we have just found is the cost per equivalent unit, what we must find now is the equivalent
units of production:

We have:

Cost equivalent units= costs of conversion added during the period/ equivalent unit

Equivalent Units= costs of conversion added during the period/ cost per equivalent unit

Equivalent units= 16,320,000/63.75

Equivalent units= 256, 000

Finally, we can find the percentage of completion:

We have:

Equivalent units of products= Units completed and sold+ equivalent units of ending work in process

Equivalent units of production= Units completed and sold + Ending work in process x percentage
completion
256,000=250,000+20,000 x X

X=30%

Thus, changing the percentage completion to 30% will decrease cost of goods sold and increase net
operating income by $62,500.

4. Do you think Carol Lee should go along with the request to alter estimates of the percentage
completion?

Carol is in a very difficult position. Collaborating with Thad Kostowski in subverting the integrity of
the accounting system is unethical by almost any standard. To put the situation in its starkest light,
Kostowski is suggesting that the production managers lie in order to get their bonus. Having said that, the
peer pressure to go along in this situation may be intense. Moreover, Carol probably prefers not to risk
alienating people she might need to rely on in the future. On the other hand, the company should perhaps
reconsider how it determines the bonus. It is quite common for companies to pay an "all or nothing" bonus
contingent on making a particular target. This is inevitably creates powerful incentives to bend the rules
when the target has not quite been attained. It might be better to have a bonus without this "all or nothing"
feature.