Question

Intrepid Industries manufactures sterile parts used in medical equipment. The company uses the weighted-average process costing method to account for production costs. It produces parts in three different departments: Forming, Sterilization, and Assembling. The following information was reported for the Assembling Department for the month of June: Beginning work-in-progress inventory on June 1 had 250,000 units made up of the following: Amount Degree of Completion Prior department costs transferred in from the Forming Department $387,600 100% Costs added by the Sterilization Department: Direct materials 317,200 100% Direct labor 120,050 40% Manufacturing overhead 67,100 30% $504,350 Work in process, June 1 $891,950 During June, 580,000 units were transferred in from the Forming Department at a cost of $1,870,000. The Assembling Department added the following costs: Direct materials $974,800 Direct labor 318,600 Manufacturing overhead 202,000 Total costs added $1,495,400 Assembling finished 480,000 units and transferred them to the Sterilization Department. At June 30, the number of units in ending work-in-progress inventory was 350,000. The degree of completion of work-in-process inventory at June 30 was as indicated below: Direct materials 80% Direct labor 65 Manufacturing overhead 30 A. Prepare a correctly formatted (including heading) production cost report (see Exhibit 8.11 as a example report) using the weighted-average method. B. Management wants to lower the costs of manufacturing the parts. It has established the following per unit targets for this product in the Assembling Department: materials, $1.65; labor, $.62; and manufacturing overhead $0.48. Has the product achieved management’s cost targets in the Assembling Department? Write a short report to management containing your answer(s). 2017 COST ACCOUNTING C. Prepare a correctly formatted (including heading) production cost report (see Exhibit 8.12 as a example report) using the FIFO method using the data given in Question A with one exception: the beginning direct materials costs as of June 1 listed in work-in-process should be $315,700 instead of $317,200. D. Using data from the FIFO report, write a short report to management addressing the issues raised in Question B.

Answer 1

a	Prepare a correctly formatted (including heading) production cost report
	Cost of production report
	for the month ended June 30
		Whole Units	DM		DL		Manufacturing OH
			%	Equivalent Units	%	Equivalent Units	%	Equivalent Units
	Units Charged To production
	1 Jun inventory in process	250000
	Received from forming depart	580000
	Total Units accounted for by the assembly deparment	830000
	Units to be assigned
	Jun 1 inventory	250000	0	0	60%	150000	70%	175000
	started and completed	230000	100%	230000	100%	230000	100%	230000
	Transferred to finished goods	480000		230000		380000		405000
	30 jun inventory in process	350000	80%	280000	65%	227500	30%	105000
	Total Units	830000		510000		6075000		510000
c	Prepare a correctly formatted (including heading) production cost report using the FIFO method using the data given in Question A
		Calculation of Equivalent unit costs
	Costs	DM	DL	Manu OH	Total
	Cost per equivalent unit
	Total Cost for Jun	974800	318600	202000
	Total Equivalent Units	510000	607500	510000
	Cost per equivalent unit	1.91	0.52	0.4
	Cost Charged to production
	1 June inventory in process	703300	120050	67100	890450
	Cost incurred	974800	318600	202000	1495400
	Total Costs accounted for				2385850
	Cost allocated to completed and partially completed units
	1 June inventory in process	703300	120050	67100	890450
	to complete inventory in process Jun1		78667	69314	147981
	Cost of completed WIP				1038431
	started and completed	439616	120622	91098	651336
	Transferred to finished goods				1689767
	inventory in process jun 30	535184	119311	41588	696083
	Total Costs accounted for				2385850
b & D	Using data from the FIFO report, write a short report to management addressing the issues raised in Question B.
		DM	DL	OH
	Target Cost per unit	1.65	0.62	0.48
	Cost per unit achieved	1.91	0.52	0.4
	Whether the target cost is as per standard	Not as per standard	Standard	Standard