Process Costing and Hybrid Product-Costing Systems 1) Problem 4–26 : Straightforward Weighted- Average Process Costing, Step-by-Step Approach (LO 3, 4, 5) 2. Total equivalent units, conversion: 226,000 Question: Piscataway Plastics Company manufactures a highly specialized plastic that is used extensively in the automobile industry. The following data have been compiled for the month of June. Conversion activity occurs uniformly throughout the production process. Work in process, June 1—50,000 units: Direct material: 100% complete cost of.. ................................................ $120,000 Conversion: 40% complete, Cost of ............................................................ 34,400 Balance in work in process, June 1 ........................................................... $154,400 Units started during June ..............................................................................200,000 Units completed during June and transferred out to finished-goods inventory ...................................................... ………………190,000 Work in process, June 30: Direct material: 100% complete Conversion: 60% complete Costs incurred during June: Direct material .............................................................................................$492,500 Conversion costs: Direct labor ....................................................................................................$ 87,450 Applied manufacturing overhead ...................................................................262,350 Total conversion costs ....................................................................................$349,800 Required: Prepare schedules to accomplish each of the following process-costing steps for the month of June. Use the weighted-average method of process costing. 1. Analysis of physical flow of units. 2. Calculation of equivalent units. 3. Computation of unit costs. 4. Analysis of total costs. 2) Problem 4–27 Missing Data; Production Report; Weighted-Average (LO 4, 5, 6) Cost remaining in ending work-in-process inventory, direct material: $123,750 Total cost of July 31 work in process: $202,950 The following data pertain to the Vesuvius Tile Company for July. Work in process, July 1 (in units) ............................................................. 20,000 Units started during July .................................................................................? Total units to account for ............................................................................65,000 Units completed and transferred out during July ............................................? Work in process, July 31 (in units) ..............................................................15,000 Total equivalent units: direct material .........................................................65,000 Total equivalent units: conversion ...................................................................? Work in process, July 1: direct material .....................................................$164,400 Work in process, July 1: conversion ................................................................? Costs incurred during July: direct material ......................................................? Costs incurred during July: conversion ........................................................659,400 Work in process, July 1: total cost ................................................................244,200 Total costs incurred during July .................................................................1,031,250 Total costs to account for ............................................................................1,275,450 Cost per equivalent unit: direct material ...........................................................8.25 Cost per equivalent unit: conversion ..................................................................? Total cost per equivalent unit ..........................................................................21.45 Cost of goods completed and transferred out during July ...................................? Cost remaining in ending work-in-process inventory: direct material ................? Cost remaining in ending work-in-process inventory: conversion ................79,200 Total cost of July 31 work in process .........................................................202,950 Additional Information: a. Direct material is added at the beginning of the production process, and conversion activity occurs uniformly throughout the process. b. The company uses weighted-average process costing. c. The July 1 work in process was 30 percent complete as to conversion. d. The July 31 work in process was 40 percent complete as to conversion. Required: Compute the missing amounts, and prepare the firm's July production report. 3)Problem 5–56 : Activity-Based Costing (LO 1, 2, 4, 5, 7) 2. New product cost, under ABC: $7.46 per pound of Kona World Gourmet Coffee Company (WGCC) is a distributor and processor of different blends of coffee. The company buys coffee beans from around the world and roasts, blends, and packages them for resale. WGCC currently has 15 different coffees that it offers to gourmet shops in one-pound bags. The major cost is raw materials; however, there is a substantial amount of manufacturing overhead in the predominantly automated roasting and packing process. The company uses relatively little direct labor. Some of the coffees are very popular and sell in large volumes, while a few of the newer blends have very low volumes. WGCC prices its coffee at full product cost, including allocated overhead, plus a markup of 30 percent. If prices for certain coffees are significantly higher than market, adjustments are made. The company competes primarily on the quality of its products, but customers are priceconscious as well. Data for the 20x1 budget include manufacturing overhead of $3,000,000, which has been allocated on the basis of each product's direct-labor cost. The budgeted direct-labor cost for 20x1 totals $600,000. Based on the sales budget and raw-material budget, purchases and use of raw materials (mostly coffee beans) will total $6,000,000. The expected prime costs for one-pound bags of two of the company's products are as follows: Kona Malaysian Direct material .................................................. $3.20 $4.20 Direct labor ....................................................... .30 .30 WGCC's controller believes the traditional product-costing system may be providing misleading cost information. She has developed an analysis of the 20x1 budgeted manufacturing-overhead costs shown in the following chart. Activity Cost Driver Budgeted Activity Budgeted Cost Purchasing ........... Purchase orders ...... 1,158 .......................... $ 579,000 Material handling ... Setups ................... 1,800 ..................... 720,000 Quality control......... Batches ............................720 ..................... 144,000 Roasting ...................Roasting hours ..............96,100 ...................... 961,000 Blending ..................Blending hours...............33,600 ...................... 336,000 Packaging ................Packaging hours ............26,000 ...................... 260,000 Total manufacturing-overhead cost.............................................................$3,000,000 Data regarding the 20x1 production of Kona and Malaysian coffee are shown in the following table. There will be no raw-material inventory for either of these coffees at the beginning of the year. Kona Malaysian Budgeted sales .............................................................. 2,000 lb. 100,000 lb. Batch size .......................................................................500 lb. 10,000 lb. Setups ..........................................................................3 per batch 3 per batch Purchase order size .........................................................500 lb. 25,000 lb. Roasting time ..............................................................1 hr. per 100 lb. 1 hr. per 100 lb. Blending time ..............................................................5 hr. per 100 lb. . 5 hr. per 100 lb. Packaging time ..........................................................1 hr. per 100 lb. . 1 hr. per 100 lb. Required: 1. Using WGCC's current product-costing system: a. Determine the company's predetermined overhead rate using direct-labor cost as the single cost driver. b. Determine the full product costs and selling prices of one pound of Kona coffee and one pound of Malaysian coffee. 2. Develop a new product cost, using an activity-based costing approach, for one pound of Kona coffee and one pound of Malaysian coffee. 3. What are the implications of the activity-based costing system with respect to a. The use of direct labor as a basis for applying overhead to products? b. The use of the existing product-costing system as the basis for pricing? Reference: For 1-3 problem Managerial Accounting , Mcgraw-hill, 2010, ebook, 9 edition 4) Exercise III–3 Economic Order Quantity All applicable Exercises are available with McGraw-Hill's Connect AccountingTM. Accounting Exercise: For each of the following independent cases, use the equation method to compute the economic order quantity. Case A Case B Case C Annual requirement (in units) .......................13,230 1,681 560 Cost per order ........................................................$250 $40 $10 Annual holding cost per unit ..............................6 20 7 Reference: Appendix I , The Sarbanes-Oxley Act, Internal Controls, and Management Accounting Prepare the responses in Excel with each problem on a separate tab.