The Ledger Of Custer Company Has The Following Work In PR

The ledger of Custer Company has the following work in pr

Exercise 16-3 The ledger of Custer Company has the following work in process account. Work in Process—Painting 5/1 Balance 4,/31 Transferred out ? 5/31 Materials 6,/31 Labor 2,/31 Overhead 2,/31 Balance ? Production records show that there were 450 units in the beginning inventory, 30% complete, 1,500 units started, and 1,530 units transferred out. The beginning work in process had materials cost of $3,010 and conversion costs of $1,750. The units in ending inventory were 40% complete. Materials are entered at the beginning of the painting process. (a), (b) and (c) (a) How many units are in process at May 31? Work in process, May 31 [removed] units (b) What is the unit materials cost for May? (Round unit costs to 2 decimal places, e.g. 2.25.) The unit materials cost for May $ [removed] (c) What is the unit conversion cost for May? (Round unit costs to 2 decimal places, e.g. 2.25.) The unit conversion cost for May $ [removed]

Paper For Above instruction

The provided problem pertains to the application of process costing in manufacturing, specifically focusing on the work-in-process account for Custer Company's painting department during May. To address the questions accurately, it is essential to analyze the data related to units, costs, and completion percentages for the period, and to apply appropriate process costing methods, including the weighted-average approach, to calculate the ending work in process units and unit costs for materials and conversion costs.

Introduction

Process costing is a cost accounting method employed by companies that produce homogeneous products in a continuous flow. It involves assigning costs to units of production at each stage of manufacturing, enabling managers to evaluate production efficiency and product costing accurately. The case of Custer Company provides a typical example of applying process costing to a painting department, with data on beginning inventory, units started and transferred out, and ending inventory, alongside associated costs.

Analysis of Units

The initial data reveals that at the beginning of May, there were 450 units in work in process, which were 30% complete. During May, 1,500 units were started, and a total of 1,530 units were transferred out. To determine the units in process at May 31, the calculations involve considering beginning inventory, units started, and units transferred out.

Using the weighted-average method, the equivalent units for production are computed by summing units transferred out with the equivalent units in ending inventory. The ending inventory units are 1,530 units transferred out plus 20 units (since 1,550 units were in process at the start, and 1,500 units were started, indicating a slight discrepancy in production, which can be clarified). The calculations reveal that the ending work in process inventory consists of 20 units, with 40% complete regarding conversion costs and materials entered at the beginning of processing.

Calculation of Units in Process

The total units in process at May 31 are derived by subtracting the units transferred out from the total units in process. This involves understanding the flow of units through each stage and applying the weighted-average process costing approach, which averages beginning inventory costs with current period costs to determine unit costs.

Cost Calculations

The key costs involve materials, labor, and overhead, accumulated in the ledger and production records. The materials are entered at the beginning, meaning all units in process at the end of the period are assumed to have the full material cost of $3,010 for beginning inventory, plus additional costs incurred during May. The costs related to labor and overhead are aggregated as $1,750 and are distributed across units based on their completion percentage.

The unit materials cost is calculated by dividing total material costs by equivalent units of materials, assuming materials are added at the start of processing. The unit conversion cost includes labor and overhead, and is obtained by dividing total conversion costs by equivalent units of conversion, which considers the degree of completion of in-process units.

Detailed Computation

  • Units in Process at May 31: Based on the given data, the work in process accounts for 20 units, which are 40% complete regarding conversion costs.
  • Unit Materials Cost for May: The total material cost divided by the equivalent units calculating the full material costs for all units, including beginning inventory and units started during May.
  • Unit Conversion Cost for May: Calculated by dividing total conversion costs (labor and overhead) by the equivalent units of work completed, considering the 40% completion of the ending inventory.

Conclusion

Applying process costing principles to Custer Company's data involves precise calculations of units and costs. The weighted-average method simplifies costing by blending beginning inventory costs with current period costs, providing a comprehensive view of production expenses. These calculated unit costs are essential for accurate product costing, profitability analysis, and inventory valuation, aligning with accounting standards and managerial decision-making processes.

References

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