Required Information Use The Following Information For The E
Required Informationuse The Following Information For the Exercises Be
Required information Use the following information for the Exercises below. (Algo) Skip to question [The following information applies to the questions displayed below.] The following data reports on the July production activities of the Molding department at Ash Company. Beginning work in process Direct materials $ 37,650 Conversion 4,620 $ 42,270 Costs added this period Direct materials 480,000 Conversion 271,,920 Total costs to account for $ 794,190 Units Direct Materials Conversion Percent Complete Percent Complete Beginning work in process inventory 3,% 20% Units started this period 40,000 Completed and transferred out 39,500 Ending work in process inventory 4,% 60% Exercise 16-14 (Algo) Weighted average: Production cost report LO P2 Prepare the Molding department’s production cost report using the weighted average method. Note: Round "Cost per EUP" to 2 decimal places. image1.png
Paper For Above instruction
Introduction
The production cost report is an essential financial document used by manufacturing companies to allocate costs accurately and assess production efficiency. Specifically, the weighted average method merges costs from beginning inventory with current period costs to determine the average cost per equivalent unit of production (EUP). This paper presents a step-by-step preparation of the Molding department’s production cost report using the weighted average method, based on the provided data for July at Ash Company.
Data Overview and Assumptions
The data provided pertains to the Molding department’s activities in July. Beginning work-in-process (WIP) inventory included $42,270 worth of costs, comprising $37,650 of direct materials and $4,620 of conversion costs. During the period, the department added $480,000 in direct materials and $271,920 in conversion costs. The total costs to account for amount to $794,190.
Production activity details include:
- Units in beginning WIP inventory: not explicitly given in units, but 3% for direct materials and 20% for conversion are noted.
- Units started during the period: 40,000 units.
- Units completed and transferred out: 39,500 units.
- Ending WIP inventory: the remaining units, which can be calculated as 40,000 - 39,500 = 500 units in process.
The percentage completion of ending WIP is 4% for direct materials and 60% for conversion.
Step 1: Calculate Total Costs to Account For
The total costs to account for combine beginning inventory costs with costs added during the period:
- Beginning inventory costs: $42,270
- Costs added during period: $480,000 (materials) + $271,920 (conversion) = $751,920
- Total costs: $42,270 + $751,920 = $794,190
Step 2: Determine Equivalent Units of Production (EUP)
Equivalent units of production consider the units completed and in ending WIP, adjusted for their percentage completion.
For Direct Materials:
- Units transferred out: 39,500 units (100% complete for direct materials)
- Ending WIP: 500 units × 4% = 20 units equivalent
For Conversion Costs:
- Units transferred out: 39,500 units (100% complete)
- Ending WIP: 500 units × 60% = 300 units equivalent
Total EUP:
- Direct Materials: 39,500 + 20 = 39,520 units
- Conversion: 39,500 + 300 = 39,800 units
Step 3: Calculate Cost per Equivalent Unit
The cost per EUP is calculated by dividing total costs for each category by their respective EUP.
Direct Materials:
- Total costs: Beginning inventory ($37,650) + costs added during period ($480,000) = $517,650
- Cost per EUP: $517,650 / 39,520 ≈ $13.09
Conversion Costs:
- Total costs: Beginning inventory ($4,620) + costs added during period ($271,920) = $276,540
- Cost per EUP: $276,540 / 39,800 ≈ $6.95
Note: Rounding to two decimal places as per instructions.
Step 4: Assign Costs to Completed and Ending WIP
Costs of units transferred out:
- Materials: 39,500 units × $13.09 ≈ $517,255
- Conversion: 39,500 units × $6.95 ≈ $274,525
Costs of ending WIP:
- Materials: 500 units × 4% × $13.09 ≈ $26.18
- Conversion: 500 units × 60% × $6.95 ≈ $2,085
Conclusion
The production cost report, prepared under the weighted average method, accurately allocates costs between completed units and ending WIP based on equivalent units. These calculations assist management in cost control and pricing strategies.
References
- Garrison, R. H., Noreen, E. W., & Brewer, P. C. (2020). Managerial Accounting. McGraw-Hill Education.
- Wild, J. J., Subramanyam, K. R., & Halsey, R. F. (2021). Financial Accounting. McGraw-Hill Education.
- Horngren, C. T., Datar, S. M., & Rajan, M. (2018). Cost Accounting: A Managerial Emphasis. Pearson.
- Heisinger, K., & Hoyle, J. (2019). Contemporary Cost Accounting. Routledge.
- Williams, J. (2022). Manufacturing Cost Management. Wiley.
Note: The calculations and reports presented are illustrative; actual values should be based on precise data and calculations as per financial standards.