Question:
SERVICE ORGANIZATION WITH WORK-IN-PROCESSINVENTORIES, MULTIPLE DEPARTMENTS, FIFO METHOD,UNIT COST Granger Credit Corporation is a wholly owned subsidiary of a large manufacturer of computers. Granger is in the business of financing computers, software, and other services that the parent corporation sells. Granger has two departments that are involve din financing services: the credit department and the business practices department. The credit department receives requests for financing from field sales representatives, records customer information on a preprinted form, and then enters the information into the computer system to check the creditworthiness of the customer. (Other actions may betaken if the customer is not in the database.) Once creditworthiness information is known, a printout is produced with this information plus other customer specific information. The completed form is transferred to the business practices department. The business practices department modifies the standard loan covenant as needed(in response to customer request or customer risk profile). When this activity is completed, the loan is priced. This is done by keying information from the partially processed form into a personal computer spreadsheet program. The program provides a recommended interest rate for the loan. Finally, a form specifying the loan terms is attached to the transferred-in document. A copy of the loan-term form is sent to the sales representative and serves as the quote letter.The following cost and service activity data for the business practices department are provided for the month of May:
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Transferred-in applications
|
2,800
|
|
Applications in process, May 1, 40% complete*
|
500
|
|
Applications in process, May 31, 25% complete*
|
800
|
*All materials and supplies are used at the end of the process.
|
|
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Direct
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Conversion
|
|
|
Transferred In
|
Materials
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Costs
|
|
Costs:
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|
|
|
|
Beginning work in process
|
$ 4,500
|
-
|
$ 2,800
|
|
Costs added
|
28,000
|
$1,250
|
37,500
|
Required:
1. How would you define the output of the business practices department?
2. Using the FIFO method, prepare the following for the business practices department:
a. A physical flow schedule
b. An equivalent units schedule
c. Calculation of unit costs
d. Cost of ending work in process and cost of units transferred out
e. A cost reconciliation
WEIGHTED AVERAGE METHOD, JOURNAL ENTRIES Muskoge Company uses a process-costing system. The company manufactures a product that is processed in two departments: molding and assembly. In the molding department, direct materials are added at the beginning of the process; in the assembly department, additional direct materials are added at the end of the process. In both departments, conversion costs are incurred uniformly throughout the process. As work is completed, it is transferred out. The following table summarizes the production activity and costs for February:
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Molding
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Assembly
|
|
Beginning inventories:
|
|
|
|
Physical units
|
10,000
|
8,000
|
|
Costs:
|
|
|
|
Transferred in
|
-
|
$45,200
|
|
Direct materials
|
$22,000
|
-
|
|
Conversion costs
|
$13,800
|
$16,800
|
|
Current production:
|
|
|
|
Units started
|
25,000
|
?
|
|
Units transferred out
|
30,000
|
35,000
|
|
Costs:
|
|
|
|
Transferred in
|
-
|
?
|
|
Direct materials
|
$56,250
|
$39,550
|
|
Conversion costs
|
$103,500
|
$136,500
|
|
Percentage of completion:
|
|
|
|
Beginning inventory
|
40%
|
50%
|
|
Ending inventory
|
80%
|
50%
|
Required:
1. Using the weighted average method, prepare the following for the molding department:
a. A physical flow schedule
b. An equivalent units calculation
c. Calculation of unit costs
d. Cost of ending work in process and cost of goods transferred out e. A cost reconciliation
2. Prepare journal entries that show the flow of manufacturing costs for the molding department.
3. Repeat Requirements 1 and 2 for the assembly department.