Question

Pease solve Case 2

CONNECTICUT COMPANY -..... manufactures makes and sells pies. Here's how it works: Basically, they buy premade frozen pies, add materials in the form of their own patented icing and spice coating. The conversion consists of a defrost/baking assembly line. Upon completion the move to the boxing department. Case One: For a moment, let's assume that the special spices are sprinkled in evenly as the baking is taking place. At the start of the period, there were 20,000 ples still in process which were already 25% complete. These pies had costs of $42,776 associated with them. 85,000 new pies entered were started during the period. At the end of the period, 12,000 pies were in process, 70% complete. $160,024 of costs where incurred during the current period. The total costs to account for, therefore, were $202,800. Questions: 1) Complete an accounting for the PHYSICAL units (part 1 of production report). How many PHYSICAL UNITS need to be accounted for? If 12,000 were still in EWIP, how many were finished? Of the ones that were finished, how many were from the BWIP? How many were also started during the period? 2) Compute the equivalent units of production for the period. In other words, IN TERMS OF WHOLE PIES, how much work did we ACTUALLY do (not physical units). 3) Before we allocate any costs, we have a total of $202,800 that must go to either one of 2 different places... where are these costs going? (what are the cost objects?) 4) How much of the $202,800 can we TRACE directly to one of the cost objects? How much is left that needs to be allocated? 5) What was the unit cost of a WHOLE pie for the period? (Cost per equivalent unit) 6) Let's apply the rate. How many equivalent units in the EWIP? How much cost goes there? How many equivalent units were completed and transferred out? How much cost is allocated there?

Answer 1

1)
Since,all the materials are added at the beginning of the process,the completion% for material
would always be 100%.The units would be incomplete only with reference to the coversion costs.
Material and conversion costs are shown seperately because the stage of completion for these
two factors of cost are different
2)
Units in Beginning Work in process	20,000
Add:
Units started in current period	85,000
Total Units		105,000
Less:
Units in Ending Work in-process		(12,000)
Units finished during the current period (balancing figure)		93,000
Units completed during the current period	93,000
Less:
Units completed from beginning work in-process	20,000
Units started and completed in the current period	73,000
9)
	Percentage of work completed in current period	Units	Equivalent Units Materials	Equivalent Units Conversion
Units in Beginning Work in process		20,000		-
Materials	0%		-
Conversion Costs	75%			15,000
Units started and completed in the current period		73,000		-
Materials	100%		73,000
Conversion Costs	100%			73,000
Units in Ending Work in-process		12,000		-
Materials	100%		12,000
Conversion Costs	70%			8,400
Equivalent units of production		105,000	85,000	96,400
10)
Equivalent units of production are partially completed units expressed in terms of finished goods.
Since, material and conversion costs enter the production process at different stages,the
equivalent units for material and conversion costs would be different for work in process units.
11)
There are two costs objects
(i) Costs of Beginning work-in- process
(ii) Equivalent units produced during the current period
12)
Material cost of $ 10,000 and conversion cost of $ 32,776 can be directly traced to the beginning
work-in-process.
Material cost of $ 30,000 can be directly traced to units started and completed during the
current process and the ending work-in-process.
The conversion cost incurred during the current process for $ 130,024 cannot be directly traced
and will have to be allocated.
13)
Unit material cost of a whole pie for the period = Cost per equivalent unit of material
Cost per equivalent unit = Costs introduced in current period / Equivalent units
Material costs introduced in the current period	$30,000
Equivalent units of production	85,000
Cost per equivalent unit	$0.35
Unit cost of materials for whole pie during the period	$0.35
Unit coversion cost of a whole pie for the period = Cost per equivalent unit conversion
Cost per equivalent unit = Costs introduced in current period / Equivalent units
Conversion costs introduced in the current period	$130,024
Equivalent units of production	96,400
Cost per equivalent unit	$1.35
Unit cost of conversion for whole pie during the period	$1.35
	Equivalent Units	Equivalent Cost per Units	Material Costs	Conversion Costs
Units in Beginning Work in process
Materials	-	0.35	-
Conversion Costs	15,000	1.35		20,232
Units started and completed in the current period
Materials	73,000	0.35	25,765
Conversion Costs	73,000	1.35		98,462
Units in Ending Work in-process
Materials	12,000	0.35	4,235
Conversion Costs	8,400	1.35		11,330
			30,000	130,024
14)
Total cost of the cost objects after allocation
	Beginning WIP Costs	Current Period Costs	Total Cost
Units in beginning WIP completed
Materials	$10,000		$10,000
Conversion Costs	$32,776	$20,232	$53,008
Units started and completed in current period
Materials		$25,765	$25,765
Conversion Costs		$98,462	$98,462
Units in ending WIP
Materials		$4,235	$4,235
Conversion Costs		$11,330	$11,330
Total cost of the cost objects after allocation	$42,776	$160,024	$202,800
	Beginning WIP Costs	Current Period Costs	Total Cost
Units in beginning WIP completed	$42,776	$20,232	$63,008
Units started and completed in current period		$124,227	$124,227
Units in ending WIP		$15,565	$15,565
Total cost of the cost objects after allocation	$42,776	$160,024	$202,800

Note-

The process costing account would appear as under:

	Units	Material	Conversion		Units	Material	Conversion
Opening WIP	20,000	$10,000	$32,776	Units completed & transferred
Units started during the period	85,000	$30,000	$130,024	Opening WIP	20,000	$10,000	$53,008
				Units started during the period	73,000	$25,765	$98,462
				Closing WIP	12,000	$4,235	$11,330
	105,000	$40,000	$162,800		105,000	$40,000	$162,800