Question 1 - Computing equivalent production, unit costs, and costs for completed units and ending inventory
Swedish Navy Company manufactures wristwatches on an assembly line. The work in process inventory as of March 1 consisted of 1,000 watches that were completed as to materials and 75% complete as to labor and overhead. The March 1 work in process costs were as follows:
|
Materials
|
$5,000
|
|
Labor
|
5,000
|
|
Overhead
|
8,000
|
|
total
|
$18,000
|
During the month, 10,000 units were started and 9,500 units were completed. The 1,500 units of ending inventory were complete as to materials and 25% were complete as to labor and overhead. The costs for March were as follows:
|
Materials
|
$61,000
|
|
Labor
|
20,000
|
|
Overhead
|
48,000
|
|
total
|
$129,000
|
Calculate:
a. Equivalent units for materials, labor, and overhead, using the average cost method.
b. Unit costs for materials, labor, and overhead
c. Cost of the units completed and transferred
d. Detailed cost of the ending inventory
e. Total of all costs accounted for
Question 2 - Calculating unit costs; units lost in production
Seymour Brothers products, Inc., manufactures a liquid product in one department. Due to the nature of the product and the process, units are regularly lost at the beginning of production. Materials and conversion costs are added evenly throughout the process. The following summaries were prepared for the month of January:
|
Production Summary
|
Units
|
|
Started in process
|
10,000
|
|
Finished and transferred to the stock room
|
8,000
|
|
In process, end of the month
|
1,000
|
|
Stage of completion
|
½
|
|
Lost in process
|
1,000
|
|
Cost Summary
|
|
|
materials
|
$132,000
|
|
labor
|
33,000
|
|
Factory overhead
|
20,625
|
Calculate the unit cost for materials, labor, and factory overhead for January and show the costs of units transferred and in process.
Question 3 - Computing equivalent units, FIFO and average cost methods
Assume each of the following conditions concerning the data given:
1. All materials are added at the beginning of the process
2. All materials are added at the end of the process. (note that this would have to be a department subsequent to the first department for all materials to be added at the end of the process.)
3. Half of the materials are added at the beginning of the process, and the balance of the materials is added when the units are three-fourths completed.
4. In all cases, labor and factory overhead are added evenly throughout the process.
|
Production summary
|
Units Dept. 1
|
Units Dept. 2
|
Units Dept. 3
|
|
Work in process, beginning of month
|
3,000
|
1,500
|
1,200
|
|
Stage of completion
|
1/2
|
3/5
|
4/5
|
|
Started in process
|
18,000
|
16,000
|
21,000
|
|
Finished and transferred
|
19,000
|
15,500
|
21,000
|
|
Work in process, end of month
|
2,000
|
2,000
|
2,000
|
|
Stage of completion
|
3/4
|
1/2
|
1/4
|
Compute separate equivalent units of production, one for materials and one for labor and factory overhead, for each of the conditions listed, using (a) the average of cost method and (b) the FIFO cost method.
Question 4 - Joint cost allocation
Chikin, Inc., specializes in chicken farming. Chickens are raised, packaged, and sold mostly to grocery chains. Chickens are accounted for in batches of 50,000. At the end of each growing period, the chickens are separated and sold by grades. Grades AA and A are sold to large grocery chains, and B and C are sold to other buyers. For costing purposes, Chikin treats each batch of chicks as a joint product. The cost data for a batch of 50,000 chicks follows:
|
Grade
|
Number of Chickens
|
Average pounds per chickens
|
Selling Price per Pound
|
|
AA
|
25,000
|
5
|
$1.00
|
|
A
|
15,000
|
4
|
0.75
|
|
B
|
6,000
|
2
|
0.50
|
|
C
|
4,000
|
1
|
0.25
|
Total joint costs for the batch were $125,000.
Required: Compute the cost allocations for each product, using the relative sales value method.