20 CHAPTER PROCESS COST SYSTEMS
EYE OPENERS
1. a. An assembly-type industry using mass production methods, such as TV assembly, would use the process cost system because the products are somewhat standard and lose their identities as individual items. In such industries, it is neither practical nor necessary to identify output by jobs. b. A job order cost system would be used by a building contractor to accumulate the costs for each individual building because the costs can be identified with each job without great difficulty. c. A job order cost system is best suited for an automobile repair shop because costs can be reasonably identified with each job. d. A process cost system would be best suited for a paper manufacturer because the processes are continuous and the products are homogeneous. e. A job order cost system is best suited for a custom jewelry manufacturer because most of the production consists of job orders, and costs can be reasonably identified with each job. 2. Since all goods produced in a process cost system are identical units, it is not necessary to classify production costs into job orders. 3. In a process cost system, the direct labor and factory overhead applied are debited to the work in process accounts of the individual production departments in which they occur. The reason is that all products produced by the department are similar. Thus, there is no need to charge these costs to individual jobs. For the process manufacturer, the direct materials and the conversion costs are charged to the department and divided by the completed production of the department to determine a cost per unit. 4. Transferred-out materials are materials that are completed in one department and transferred to another department or to finished goods. 5. (1) Determine the units to be assigned costs. (2) Calculate the equivalent units of production. (3) Determine the cost per equivalent unit. (4) Allocate costs to completed and partially completed units. 6. Equivalent units is the term used to repres ent the total number of units that would have been completed within a processing department as a result of the productive efforts during a period. They are the portion of the whole units that are completed with respect to material or conversion costs during the period. Equivalent units may be said to measure the productive activity for a given period. 7. The cost per equivalent unit is frequently determined separately for direct materials and conversion costs because these two costs are frequently incurred at different rates in the production process. For example, materials may be incurred entirely at the beginning of the process, while conversion costs are typically incurred evenly throughout the process. 8. The cost per equivalent unit is used to allocate direct materials and conversion costs between completed and partially completed units. 9. The transferred-in cost from Blending to Filling includes the materials costs, direct labor, and applied factory overhead incurred to complete units in Blending. 10. Actual factory overhead incurred is debited to departmental factory overhead accounts. 11. The most important purpose of the cost of production report is to assist in the control of costs. This is accomplished by holding each department head responsible for the costs incurred in the department. 12. Cost of production reports can provide detailed data about the process. The reports can provide information on the department by individual cost elements. This can enable management to investigate problems and opportunities.
71
13.
14.
Yield is a measure of the materials usage efficiency of a process manufacturer. It is determined by dividing the output volume of product by the input volume of product. For example, if 950 tons of aluminum were rolled from 1,000 tons of ingot, then the yield would be said to be 95%. Five percent of the ingot was scrapped during the rolling process. Just-in-time processing is a business philosophy that focuses on reducing time and
cost and eliminating poor quality within processes. 15. Just-in-time processing emphasizes combining process functions into manufacturing cells, involving employees in process improvement efforts, eliminating wasteful activities, and reducing the amount of work in process inventory required to fulfill production targets.
72
PRACTICE EXERCISES PE 201A
Designer clothes manufacturing Business consulting CD manufacturing Home construction Plastic manufacturing Steel manufacturing Job order Job order Process Job order Process Process
PE 201B
Aluminum production Gasoline refining Movie studio Papermaking Print shop Web designer Process Process Job order Process Job order Job order
PE 202A
79,430 tons started and completed (83,580 tons completed 4,150 tons begin ning WIP), or (86,200 tons started 6,770 tons ending WIP)
PE 202B
461,000 ounces started and completed (486,000 ounces completed 25,000 ounces beginning WIP), or (480,000 ounces started 19,000 ounces ending WIP)
PE 203A
Total Whole Units Inventory in process, beginning of period.... Started and completed during the period..... Transferred out of Rolling (completed)......... Inventory in process, end of period............... Total units to be assigned costs.................... *(83,580 4,150) 4,150 79,430* 83,580 6,770 90,350 Percent Materials Added in Period 0% 100% 100% Equivalent Units for Materials 0 79,430 79,430 6,770 86,200
PE 203B
Total Whole Units Inventory in process, beginning of period.... Started and completed during the period..... Transferred out of Filling (completed)........... Inventory in process, end of period............... Total units to be assigned costs.................... *(486,000 25,000) 25,000 461,000* 486,000 19,000 505,000
Percent Materials Added in Period 0% 100% 100%
Equivalent Units for Materials 0 461,000 461,000 19,000 480,000
PE 204A
Percent Equivalent Total Conversion Units Whole Completed in for Units Period Conversion Inventory in process, beginning of period.... Started and completed during the period..... Transferred out of Rolling (completed)......... Inventory in process, end of period............... Total units to be assigned costs.................... *(83,580 4,150) 4,150 79,430* 83,580 6,770 90,350 60% 100% 30% 2,490 79,430 81,920 2,031 83,951
PE 204B
Percent Equivalent Total Conversion Units Whole Completed in for Units Period Conversion Inventory in process, beginning of period.... Started and completed during the period..... Transferred out of Filling (completed)........... Inventory in process, end of period............... Total units to be assigned costs.................... *(486,000 25,000) 25,000 461,000* 486,000 19,000 505,000 30% 100% 25% 7,500 461,000 468,500 4,750 473,250
PE 205A
Equivalent units of direct materials: Equivalent units of conversion: $4,654,800 = $54 per ton 86,200
$1,091,363 = $13 per ton 83,951
PE 205B
Equivalent units of direct materials: Equivalent units of conversion: $216,000 = $0.45 per ounce 480,000
$47,325 = $0.10 per ounce 473,250
PE 206A
Direct Materials Costs
Inventory in process, balance.......................... Inventory in process, beginning of period...... Cost of completed beginning work in process Started and completed during the period....... 79,430 Transferred out of Rolling (completed)........... Inventory in process, end of period................. 6,770 Total costs assigned by the Rolling Dept....... Completed and transferred-out production.... Inventory in process, ending............................ 0+
Conversion Costs
$ 2,490 $13
Total Costs
246,000 32,370 $ 278,370 5,321,810 $5,600,180 391,983 $5,992,163
$54 + 79,430 $13 $54 + 2,031 $13
$5,600,180 $391,983
PE 206B
Direct Materials Costs Conversion Costs Total Costs
Inventory in process, balance...................... $ 13,000 Inventory in process, beginning of period.. 0 + 7,500 $0.10 750 Cost of completed beginning work in process $ 13,750 Started and completed during the period.. . 461,000 $0.45 + 461,000 $0.10 253,550 Transferred out of Filling (completed)......... $267,300 Inventory in process, end of period............ 19,000 $0.45 + 4,750 $0.10 9,025 Total costs assigned by the Filling Dept..... $276,325 Completed and transferred-out production...... Inventory in process, ending............................. $267,300 $9,025
PE 207A
a. Work in ProcessRolling............................................. Work in ProcessCasting...................................... Work in ProcessRolling............................................. Factory OverheadRolling..................................... Wages Payable......................................................... Finished Goods.............................................................. Work in ProcessRolling....................................... b. 4,654,800 4,654,800 1,091,363 666,563 424,800 5,600,180 5,600,180
$391,983 ($246,000 + $4,654,800 + $1,091,363 $5,600,180)
PE 207B
a. Work in ProcessFilling.............................................. Work in ProcessBlending.................................... Materials.................................................................... Work in ProcessFilling.............................................. Factory OverheadFilling...................................... Wages Payable......................................................... Finished Goods.............................................................. Work in ProcessFilling......................................... b. $9,025 ($13,000 + $216,000 + $47,325 $267,300) 216,000 55,600 160,400 47,325 29,300 18,025 267,300 267,300
PE 208A
Material cost per ton, May: Material cost per ton, June: $94,000 = $188 500 $82,800 = $184 450
The cost of materials has decreased by $4 per ton between May and June.
PE 208B
Energy cost per pound, August: $162,000 = $0.36 450,000 $160,000 = $0.40 400,000
Energy cost per pound, September:
The cost of energy has increased by 4 cents per pound between August and September.
EXERCISES Ex. 201
a. Work in ProcessBlending Department...................... MaterialsCocoa Beans........................................... MaterialsSugar........................................................ MaterialsDehydrated Milk...................................... XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX
b. Work in ProcessMolding Department....................... Work in ProcessBlending Department................ c. Work in ProcessPacking Department....................... Work in ProcessMolding Department..................
d. Finished Goods............................................................... Work in ProcessPacking Department.................. e. Cost of Goods Sold......................................................... Finished Goods..........................................................
Ex. 202
Materials Factory Overhead Smelting Dept. Work in Process Smelting Dept.
Factory Overhead Rolling Dept.
Work in Process Rolling Dept.
Finished Goods Rolled Sheet
Factory Overhead Converting Dept.
Work in Process Converting Dept.
Finished Goods Sheared Sheet
Cost of Goods Sold
Ex. 203
a. 1. Work in ProcessRefining Department................. Materials................................................................ 2. Work in ProcessRefining Department................. Wages Payable..................................................... 3. Work in ProcessRefining Department................. Factory OverheadRefining Department......... b. Work in ProcessSifting Department.......................... Work in ProcessRefining Department................. *$23,700 + $420,000 + $148,000 + $97,300 $29,100 420,000 420,000 148,000 148,000 97,300 97,300 659,900* 659,900
Ex. 204
a. Factory overhead rate: $546,000 $420,000 = 130% b. Work in ProcessBlending Department...................... Factory OverheadBlending Department.............. $36,000 130% = $46,800 c. $1,800 credit d. Overapplied factory overhead 46,800 46,800
Ex. 205
A
1 2 3 4 5 6 7 8
B Whole Units
C D Equivalent Units Direct Materials Conversion 16,760 16,760 940 17,700 210 16,760 16,970 235 17,205
Inventory in process, beginning (75% completed) Started and completed Transferred to Packing Department Inventory in process, ending (25% completed) Total *17,600 840
840 16,760* 17,600 940 18,540
Ex. 206
a. Drawing Department
A 1 2 3 4 5 6 7 8 Inventory in process, April 1 (40% completed) Started and completed in April Transferred to Winding Department in April Inventory in process, April 30 (55% completed) Total *74,000 5,400 B Whole Units 5,400 68,600* 74,000 4,100 78,100 C D Equivalent Units Direct Materials Conversion 68,600 68,600 4,100 72,700 3,240 68,600 71,840 2,255 74,095
b. Winding Department
A 1 2 3 4 5 6 7 8 Inventory in process, April 1 (70% completed) Started and completed in April Transferred to finished goods in April Inventory in process, April 30 (15% completed) Total *73,200 2,200 B Whole Units 2,200 71,000* 73,200 3,000 76,200 C D Equivalent Units Direct Materials Conversion 71,000 71,000 3,000 74,000 660 71,000 71,660 450 72,110
Note: Of the 74,000 units transferred in, 71,000 units were started and completed and 3,000 units are in ending work in process.
Ex. 207
a. Units in process, March 1........................................... Units placed into production for March.................... Less units finished during March.............................. Units in process, March 31.........................................
A 1 2 3 4 5 6 7 8 Inventory in process, March 1 (2/5 completed) Started and completed in March Transferred to finished goods in March Inventory in process, March 31 (3/5 completed) Total *148,000 8,000 B Whole Units 8,000 140,000* 148,000 5,000 153,000
8,000 145,000 (148,000) 5,000
b.
C D Equivalent Units Direct Materials Conversion 0 140,000 140,000 5,000 145,000 4,800 140,000 144,800 3,000 147,800
Ex. 208
a. 1. $1.60 ($232,000/145,000 units) 2. $0.70 [($66,400 + $37,060)/147,800 units] 3. $18,720, determined as follows: Work in ProcessBaking Department balance, March 1........ Conversion costs incurred during March (4,800 equivalent units $0.70)................................................ Cost of beginning work in process completed during March $15,360 3,360 $18,720
4. $322,000 [($1.60 + $0.70) 140,000 units] Note to Instructors: The cost of the beginning work in process completed during March, $18,720, plus the cost of the units started and completed during March, $322,000, equals the cost of the units finished during March, $340,720. 5. $10,100, determined as follows: Direct materials ($1.60 5,000 units)......................................... Conversion costs ($0.70 3,000 equivalent units)................... Cost of ending work in process.................................................. $ 8,000 2,100 $10,100
Note: The cost of ending work in process is also the balance of Work in ProcessBaking Department as of March 31. b. The conversion costs in March decreased by $0.10 per equivalent unit, de termined as follows: Work in ProcessBaking Department balance, March 1.............. Deduct direct materials cost incurred in February ($1.60 8,000 units)....................................................................... Conversion costs incurred in February........................................... February conversion cost per equivalent unit [$2,560/(8,000 units 2/5)]............................................................ March conversion cost per equivalent unit.................................... Less February conversion cost per equivalent unit...................... Decrease in conversion cost per equivalent unit........................... $15,360 12,800 $ 2,560 $ 0.80 $ 0.70 0.80 $ (0.10)
Ex. 209
Equivalent units of production: Cereal (in pounds) Inventory in process, October 1.......... Started and completed in October...... Transferred to finished goods in October......................................... Inventory in process, October 31........ Total........................................................ Supporting explanation: The whole unit inventory in process on October 1 includes both the cereal in the hopper and the boxes in the carousel, and thus, includes no equivalent units for the material during the current period. The reason is because the costs for the cereal and boxes were introduced to the Packing Department in September. Since conversion costs are incurred only when the cereal is filled into boxes, all 600 boxes of the October 1 inventory in process will have conversion costs in curred in October. The product started and completed in October includes 32,200 boxes (32,800 boxes completed less the 600 in the carousel on October 1). These boxes repres ent 48,300 pounds of cereal (32,200 24 oz./16 oz.), since there are 16 ounces to a pound. Alternatively, there were a total of 49,200 pounds of cereal boxed during October (32,800 boxes 24 oz./16 oz.); however, 900 of these pounds were already introduced in September and accounted for in the October 1 inventory in process. The inventory in process on October 31 includes the remaining pounds of cereal in the hopper and boxes in the carousel that are properly included in the equivalent unit computation for October (since the costs were incurred in the depart ment in October). No conversion costs have been applied to these boxes since they remain unfilled. Note to Instructors: An actual cereal-filling line begins with the empty box carousel. The box carousel holds flattened boxes that are fed into a high-speed line that opens the box up and places it on a conveyor. The conveyor brings the opened box under a filler head. The cereal pours from the hopper through the filler head into the open box (actually into the inner sealer bag). The box then moves down the line to be boxed into a large shipping carton, which is then moved to the warehouse. 48,300 48,300 1,125 49,425 Boxes Conversion Cost (in boxes) (in boxes) 32,200 32,200 750 32,950 600 32,200 32,800 32,800
Ex. 2010
a. Direct labor............................................................................................ Factory overhead applied.................................................................... Total conversion cost........................................................................... 122,850 $ 99,500 23,350 $
b. Equivalent units of production for conversion costs: Beginning inventory........................................................................ Started and completed.................................................................... Ending inventory (3/5 15,000 units)............................................ Total equivalent units for conversion costs................................ Conversion cost per equivalent unit: $122,850 = $0.65 conversion cost per equivalent unit 189,000 c. Equivalent units of production for direct materials costs: Beginning inventory........................................................................ Started and completed.................................................................... Ending inventory (all units completed as to direct materials)... Total equivalent units for direct materials costs......................... Direct materials cost per equivalent unit: $604,500 = $3.10 direct materials cost per equivalent unit 195,000
0 180,000 9,000 189,000
0 180,000 15,000 195,000
Ex. 2011
a. Units in process at beginning of period....................................... Units placed in production during period.................................... Less units finished during period................................................. Units in process at end of period.................................................. b.
A 1 2 3 4 5 6 7 8 Inventory in process, beginning (35% completed) Started and completed Transferred to finished goods Inventory in process, ending (45% completed) Total units *92,200 4,000 B Whole Units 4,000 88,200* 92,200 5,800 98,000 C D Equivalent Units Direct Materials Conversion 0 88,200 88,200 5,800 94,000 2,600 88,200 90,800 2,610 93,410
4,000 94,000 (92,200) 5,800
c.
A 1 2 3 4 5 6 C Costs Direct Materials Conversion $164,500 $186,820* 94,000 93,410 $ 1.75 $ 2.00 B
Total costs for period in Assembly Department Total equivalent units (from above) Cost per equivalent unit *$134,800 + $52,020
d.
$330,750 [($1.75 + $2.00) 88,200 units]
Ex. 2012
a. 1. $14,790; determined as follows: Beginning work in process balance........................................... Conversion costs incurred during period (2,600 equivalent units $2.00).............................................. Cost of beginning work in process completed during period 2. Cost of beginning work in process............................................ Cost of units started and completed during period................. Cost of units transferred to finished goods during period..... *($1.75 + $2.00) 88,200 units 3. $15,370; determined as follows: Direct materials ($1.75 5,800 units)......................................... Conversion costs ($2.00 2,610 equivalent units)................... Cost of ending work in process inventory................................ $10,150 5,220 $15,370 $ 9,590 5,200 $14,790 $ 14,790 330,750* $345,540
Note: The cost of ending work in process is also the ending balance of Work in ProcessAssembly Department. 4. $3.70 rounded ($14,790/4,000 units) b. Yes. The production costs per unit increased during the current period. The cost per unit of the units started and completed during the period is $3.75 ($1.75 + $2.00). Since the cost per unit of the completed beginning work in process is $3.70 [see part (4) above], the production costs during the current period must have increased. c. The conversion cost in the current period increased by $0.15 per equivalent unit, determined as follows: Beginning work in process............................................................... Deduct direct materials cost incurred in prior period ($1.75 4,000 units)...................................................................... Conversion costs incurred in prior period...................................... Current-period conversion cost per equivalent unit...................... Less prior-period conversion cost per equivalent unit [$2,590/(4,000 units 0.35)]......................................................... Increase in conversion cost per equivalent unit during current period................................................................................ $9,590 7,000 $2,590 $2.00 1.85 $0.15
Ex. 2013
1. In computing the equivalent units for conversion costs applicable to the September 1 inventory, the 4,000 units are multiplied by 3/5 rather than 2/5, which is the portion of the work completed in September. Therefore, the equivalent units should be 1,600 (4,000 2/5) instead of 2,400. 2. In computing the equivalent units for conversion costs for units started and completed in September, the September 1 inventory of 4,000 units, rather than the September 30 inventory of 5,500 units, was subtracted from 36,000 units started in the department during September. Therefore, the equivalent units started and completed should be 30,500 instead of 32,000. 3. The correct equivalent units for conversion costs should be 33,200, determined as follows: To process units in inventory on September 1: 4,000 2/5......................................................................................... 1,600 To process units started and completed in September: 36,000 5,500................................................................................... 30,500 To process units in inventory on September 30: 5,500 1/5......................................................................................... 1,100 Equivalent units of production............................................................ 33,200
Ex. 2014
a. b.
A 1 2 3 4 5 6 7 8 Inventory in process, June 1 (60% completed) Started and completed in June Transferred to finished goods in June Inventory in process, June 30 (70% completed) Total units *68,000 6,000 B Whole Units 7,500 62,000* 69,500 6,000 75,500 C D Equivalent Units Direct Materials Conversion 0 62,000 62,000 6,000 68,000 3,000 62,000 65,000 4,200 69,200
69,500 units (7,500 + 68,000 6,000)
A 1 2 3 4 5 6
B
C
Total costs for June in Forging Department Total equivalent units (from above) Cost per equivalent unit *$83,380 + $117,300
Costs Direct Materials Conversion $761,600 $200,680* 68,000 69,200 $ 11.20 $ 2.90
c. $874,200 [62,000 units ($11.20 + $2.90)]
Ex. 2015
a. $107,550; determined as follows: Beginning work in process balance................................................... Conversion costs incurred during June (3,000 equivalent units $2.90)....................................................... Cost of beginning work in process completed during June........... b. Cost of beginning work in process.................................................... Cost of units started and completed during June............................ Cost of units transferred to finished goods during June................ *($11.20 + $2.90) 62,000 units c. $79,380; determined as follows: Direct materials ($11.20 6,000 units)............................................... Conversion costs ($2.90 4,200 equivalent units)........................... Cost of ending work in process inventory........................................ $67,200 12,180 $79,380 $ 98,850 8,700 $107,550 $107,550 874,200* $981,750
Note: The cost of ending work in process is also the ending balance of the Work in ProcessForging Department as of June 30. d. Direct materials cost per equivalent unit: $11.50 ($86,250/7,500 units) Conversion cost per equivalent unit: $2.80 ($12,600*/4,500 units**) *Work in process, June 1................................................................ Less direct materials cost............................................................. Conversion cost included in June 1, work in process.............. $98,850 86,250 $12,600
**Equivalent units in June 1, work in process (7,500 60%) = 4,500 units e. Direct materials: Decrease of $0.30 ($11.20 $11.50) Conversion: Increase of $0.10 ($2.90 $2.80)
Ex. 2016
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 B C D ST. ARBUCKS COFFEE COMPANY Cost of Production ReportRoasting Department For the Month Ended May 31, 2010 Equivalent Units Direct Materials Conversion Units Whole Units (a) (a) Units charged to production: Inventory in process, May 1 800 Received from materials storeroom 25,000 Total units accounted for by the Roasting Department 25,800 Units to be assigned cost: Inventory in process, May 1 (20% completed) 800 0 6401 2 Started and completed in May 24,500 24,500 24,500 Transferred to finished goods in May 25,300 24,500 25,140 Inventory in process, May 31 (42% completed) 500 500 2103 Total units to be assigned cost 25,800 25,000 25,350 1 80% 800 2 25,000 500 3 42% 500 A
Ex. 2016
Concluded
B Direct Materials $93,750 25,000 $ 3.75 C Costs Conversion $40,560 25,350 $ 1.60 $ 3,280 134,3101 $137,590 D Total
A 1 2 Costs 3 Unit costs: Total costs for May in Roasting 4 Department 5 Total equivalent units 6 Cost per equivalent unit (b) 7 Costs charged to production: 8 Inventory in process, May 1 9 Costs incurred in May Total costs accounted for by the 10 Roasting Department Costs allocated to completed and partially 11 completed units: 12 Inventory in process, May 1 balance To complete inventory in process, 13 May 1 14 Cost of completed May 1 work in process 15 Started and completed in May 16 Transferred to finished goods in May (c) 17 Inventory in process, May 31 (d) Total costs assigned by the Roasting 18 Department 1 19 $93,750 + $40,560 20 2640 units $1.60 21 324,500 units $3.75 22 424,500 units $1.60 23 5500 units $3.75 24 6210 units $1.60
$ $ 0 91,8753 1,8755 $ 1,0242 39,2004 3366
3,280
$
1,024 4,304 131,075 $135,379 2,211 $137,590
Ex. 2017
A B C D 1 PERMA-WEAR CARPET COMPANY 2 Cost of Production ReportCutting Department 3 For the Month Ended October 31, 2010 4 Equivalent Units 5 Units Whole Units Direct Materials Conversion 6 Units charged to production: 7 Inventory in process, October 1 6,000 8 Received from Weaving Department 162,000 Total units accounted for by the 9 Cutting Department 168,000 10 Units to be assigned cost: Inventory in process, October 1 11 (75% completed) 6,000 0 1,5001 2 12 Started and completed in October 154,400 154,400 154,400 Transferred to finished goods in 13 October 160,400 154,400 155,900 Inventory in process, October 31 14 (30% completed) 7,600 7,600 2,2803 15 Total units to be assigned cost 168,000 162,000 158,180 16 125% 6,000 17 2162,000 7,600 18 330% 7,600
Ex. 2017
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Unit costs:
Concluded
A Costs B Direct Materials C Costs Conversion D Total
Total costs for October in Cutting Department Total equivalent units Cost per equivalent unit Costs charged to production: Inventory in process, October 1 Costs incurred in October Total costs accounted for by the Cutting Department Costs allocated to completed and partially completed units: Inventory in process, October 1 balance To complete inventory in process, October 1 Cost of completed October 1 work in process Started and completed in October Transferred to finished goods in October Inventory in process, October 31 Total costs assigned by the Cutting Department 1 $1,215,000 + $362,080 + $191,550 2 1,500 units $3.50 3 154,400 units $7.50 4 540,400 units $3.50 5 7,600 units $7.50 6 2,280 units $3.50
$1,215,000 162,000 $ 7.50
$ 553,630 158,180 $ 3.50 $ 62,250 1,768,6301 $1,830,880
$ $ 5,2502 $
62,250 5,250
$1,158,0003 57,0005
540,4004 7,9806
67,500 1,698,400 $1,765,900 64,980 $1,830,880
Ex. 2018
a. 1. Work in ProcessCasting Department.................. MaterialsAlloy.................................................... 2. Work in ProcessCasting Department.................. Wages Payable..................................................... Factory Overhead................................................. *$45,072 150% 3. Work in ProcessMachining Department.............. Work in ProcessCasting Department............. *Supporting calculations: Cost of 7,750 transferred-out pounds: Inventory in process, December 1................................................. $ 111,680 Cost to complete December 1 inventory: 320 pounds $15/lb. (see calculations below)....................... 4,800 Pounds started and completed in December [6,950 lbs. ($126 + $15)].......................................................... 979,950 Transferred to Machining Department.......................................... $1,096,430 Supporting equivalent unit and cost per equivalent unit calculations:
A 1 2 3 4 5 6 7 8 9 Inventory in process, December 1 (60% completed) Started and completed in December Transferred to Machining Department in December Inventory in process, December 31 (44% completed) Total 1 40% 800 2 44% 550 B Whole Units 800 6,950 7,75 0 550 8,300 C D Equivalent Units Materials Conversion 6,950 6,950 550 7,500 3201 6,950 7,270 2422 7,512
945,000 945,000 112,680 45,072 67,608* 1,096,430* 1,096,430
Cost per equivalent unit of materials:
$945,000 = $126 per pound 7,500 $112,680 = $15 per pound 7,512
Cost per equivalent unit of conversion:
Ex. 2018
Concluded
b. $72,930; determined as follows: Direct materials (550 $126).......................................... Conversion (550 44% $15)....................................... or $72,930 = $111,680 + $945,000 + $45,072 + $67,608 $1,096,430 $ 69,300 3,630 $ 72,930
Ex. 2019
a. 1. Work in ProcessPapermaking Department......... MaterialsPulp..................................................... 2. Work in ProcessPapermaking Department......... Wages Payable..................................................... Factory Overhead................................................. 3. Work in ProcessConverting Department............. Work in ProcessPapermaking Department.... *Supporting calculations: Cost of 101,400 transferred-out units: Inventory in process, January 1.................................................... Cost to complete January 1 inventory: 4,225 units $1.80/unit (see calculations below).................. Units started and completed in January [94,900 units ($3.90 + $1.80)]................................................. Transferred to Converting Department......................................... $ 29,250 7,605 540,930 $577,785 397,800 397,800 188,649 107,600 81,049 577,785* 577,785
Supporting equivalent unit and cost per equivalent unit calculations:
A 1 2 3 4 5 6 7 8 9 Inventory in process, January 1 (35% completed) Started and completed in January Transferred to Converting Department in January Inventory in process, January 31 (80% completed) Total 1 65% 6,500 2 80% 7,100 B Whole Units 6,500 94,900 101,400 7,100 108,500 C D Equivalent Units Materials Conversion 94,900 94,900 7,100 102,000 4,2251 94,900 99,125 5,6802 104,805
Ex. 2019
Concluded
$397,800 = $3.90 per unit 102,000 $188,649 = $1.80 per unit 104,805
Cost per equivalent unit of materials:
Cost per equivalent unit of conversion: b. $37,914; determined as follows:
Direct materials (7,100 $3.90)...................................... Conversion (7,100 80% $1.80)................................. or
$27,690 10,224 $37,914
$37,914 = $29,250 + $397,800 + $107,600 + $81,049 $577,785
Ex. 2020
Memo To: Production Manager The cost of production report was used to identify the cost per case for each of the four flavors as shown below.
A 1 2 Total cost 3 Number of cases 4 Cost per case B Orange $26,075 3,500 $ 7.45 C Cola $393,000 60,000 $ 6.55 D Lemon-Lime $292,500 45,000 $ 6.50 E Root Beer $17,700 2,000 $ 8.85
As can be seen, the cost per case of Root Beer is significantly above the cost per case of the other three flavors. A more detailed analysis is necessary to un derstand the causes of this difference. The individual cost elements that determine the total cost can be divided by the number of cases. This analysis is provided below.
A 1 2 3 Concentrate 4 Water 5 Sugar 6 Bottles 7 Flavor changeover 8 Conversion cost 9 Total cost per case B Orange $1.90 0.60 1.00 2.20 1.00 0.75 $7.45 C D E Cost per Case by Cost Element Cola Lemon-Lime Root Beer $2.25 $2.20 $1.80 0.60 0.60 0.60 1.00 1.00 1.00 2.2 2.20 2.20 0 2.5 0.10 0.10 0 0.7 0.40 0.40 5 $6.55 $6.50 $8.85
The table above indicates that the concentrate per case is actually less for Orange and Root Beer than for Cola and Lemon-Lime. This is because the concentrate supplier charges a higher price for the more popular flavors. The costs per case for water, sugar, and bottles are the same for each flavor. However, the costs per case for changeover are much greater for Orange and Root Beer than for the other two flavors. In addition, the conversion costs per unit for Orange and Root Beer are $0.35 higher than for Cola and Lemon-Lime. These last two cost elements are sufficient to cause the cost per case of Orange and Root Beer to be greater than Cola and Lemon-Lime. Although further analysis is necessary, it appears that Orange and Root Beer are either bottled in short production runs, meaning more frequent changeovers, or that each Orange and Root Beer changeover is very difficult and expensive. The conversion cost per case is larger because the bottling line rate appears slower for Orange and Root Beer, compared to Cola and Lemon-Lime. Its possible that shorter run sizes are related to the slower line rate because it takes some run
time to work the line rate up to a fast speed after a changeover. Root Beer costs more per case than Orange because it has the shortest run length.
Ex. 2021
The solution to this exercise is to determine if cost per pound trends in paper stock, conversion, and coating costs are remaining stable over time. The following table can be developed from the data: a.
A 1 2 Paper stock ($/pounds output) Coating 3 ($/pounds output) Conversion cost 4 ($/pounds output) Yield (pounds transferred 5 out/pounds input) B C January February $0.80 $0.18 $0.40 96% $0.80 $0.20 $0.40 96% D March $0.80 $0.22 $0.40 96% E April $0.80 $0.25 $0.40 96% F May $0.80 $0.26 $0.40 96% G June $0.80 $0.30 $0.40 96%
The cost per pound information is determined by dividing the costs by the pounds transferred out. The yield is determined by dividing the pounds transferred out by the pounds input. b. Operator 1 believes that energy consumption is becoming less efficient. The energy cost is part of the conversion cost. The conversion cost per output pound has remained constant for the six months. If the energy efficiency were declining, it would take more energy per pound of output over time. Thus, we would expect to see the conversion rate per pound increasing if Operator 1 were correct. Operator 2 believes that there are increasing materials losses from increasing startup and shutdown activity. Yield data would help determine if this were true. If materials losses were growing, then there would be less materials transferred out per pound of inputs over time. The yield has remained con stant over the six-month period. Thus, Operator 2s hypothesis is not validated. The stable cost of the paper stock per output pound also suggests that the yields are remaining stable. Operator 3 is concerned about coating costs. The coating cost per output pound is increasing over time. Thus, we can conclude that the coating effi ciency is declining over time. Apparently, more coating material was being spread per pound of output in June than in January. The coating operation may need to be repaired or recalibrated. Too much coating is being spread on the paper stock.
Ex. 2022
The Solaris Machining managers are displaying typical fears to a just-in-time processing system. Just-in-time removes the safety provided by materials, in-process, and finished goods inventory balances. Indeed, these types of comments reflect conventional manufacturing philosophy, which views inventory as a necessary buffer against surprises and other unwelcome events. The just-intime philosophy focuses on removing the causes that require a need for invent ory. In the case of materials inventories, a just-in-time philosophy requires all suppli ers to provide high-quality materials on a daily basis in just the right quantities needed for a days production. If the supplier has unreliable production schedules or quality, then the sources of unreliability would need to be fixed before moving to just-in-time delivery. Only when suppliers are reliable can Solaris Machining move to a just-in-time strategy without exposing the company to significant risk. The in-process inventories can be reduced significantly if the underlying manufacturing processes are made reliable. The director of manufacturing is correct in his observation, but his solution is wrong. The solution is not to increase invent ory but to improve the reliability of the machines so that they do not experience emergency breakdowns. Thus, the manufacturing operation must be improved to produce the right product, in the right quantities, at the right quality, and at the right time. Only with this level of reliability can a plant responsibly remove in-process inventories from the system. The finished goods inventory can also be reduced if the manufacturing system can be made responsive to customer demands. A company will no longer have to stock warehouses with product based on guesses at what the customer will want many weeks ahead of demand. Rather, goods are produced at the time the customer orders them. This is what Dell Inc. does. It builds a computer to order, rather than stocking the computer and selling it from inventory. In other words, inventory covers a multitude of sins. When the sins are removed, the inventory can be removed.
Appendix Ex. 2023
a. and b.
A 1 2 3 4 5 6 7 8 9 10 11 Units to be accounted for: Beginning work in process Units started during period Total Units to be assigned costs: Transferred to Packing Department Inventory in process, ending (30% completed) Total 1 25,200 2,000 + 1,100 2 30% 1,100 B a. Whole Units 2,000 24,3001 26,300 25,200 1,100 26,300 25,200 3302 25,530 C b. Equivalent Units of Production
Appendix Ex. 2024
a. Drawing Department
A 1 2 Units to be accounted for: 3 Beginning work in process 4 Units started during period 5 Total 6 Units to be assigned costs: 7 Transferred to Winding Department in August Inventory in process, August 31 (55% 8 completed) 9 Total 10 190,000 2,100 + 2,500 11 255% 2,500 B Whole Units 2,100 90,4001 92,500 90,000 2,500 92,500 90,000 1,3752 91,375 C Equivalent Units of Production
b. Winding Department
A 1 2 Units to be accounted for: 3 Beginning work in process 4 Units started during the period 5 Total 6 Units to be assigned costs: 7 Transferred to finished goods in August Inventory in process, August 31 (25% 8 completed) 9 Total 10 189,200 2,000 + 2,800 11 225% 2,800 B Whole Units 2,000 90,0001 92,000 89,200 2,800 92,000 89,200 7002 89,900 C Equivalent Units of Production
Appendix Ex. 2025
a. Units in process, March 1.......................................... Units placed into production for March................... Less units finished during March............................. Units in process, March 31........................................ 15,000 144,000 (142,500) 16,500
b.
A 1 2 3 4 5 6 7 8 9 10 Units to be accounted for: Beginning work in process Units started during the period Total Units to be assigned costs: Transferred to finished goods in March Inventory in process, March 31 (60% completed) Total *60% 16,500 B Whole Units 15,000 144,000 159,000 142,500 16,500 159,000 142,500 9,900* 152,400 C Equivalent Units of Production
Appendix Ex. 2026
a. and b.
A 1 2 3 4 5 6 7 8 9 10 Units to be accounted for: Beginning work in process Units started during the period Total Units to be assigned costs: Transferred to finished goods Inventory in process, ending Total units *30% 4,900 B Whole Units 8,000 82,300 90,300 85,400 4,900 90,300 85,400 1,470* 86,870 C Equivalent Units of Production
c.
Cost per Equivalent Unit =
Total Production Costs Total Equivalent Units $347,480 * = $4.00 86,870 units
Cost per Equivalent Unit =
*$12,900 + $161,000 + $91,800 + $81,780 d. Cost of units transferred to Finished Goods: $341,600 (85,400 units $4.00) e. Cost of units in ending Work in Process: $5,880 (4,900 units 30% $4.00)
Appendix Ex. 2027
a.
A 1 2 Units to be accounted for: 3 Beginning work in process 4 Units started during the period 5 Total 6 Units to be assigned costs: 7 Transferred to finished goods in June Inventory in process, 30 June (70% com8 pleted) 9 Total units 10 *70% 2,300 B Whole Units 2,000 46,200 48,200 45,900 2,300 48,200 45,900 1,610* 47,510 C Equivalent Units of Production
Cost per Equivalent Unit =
Total Production Costs Total Equivalent Units $546,365 * = $11.50 47,510 units
Cost per Equivalent Unit =
*$9,120 + $324,800 + $137,045 + $75,400 b. Cost of units transferred to Finished Goods: $527,850 (45,900 units $11.50) c. Cost of units in ending Work in Process: $18,515 (2,300 units 70% $11.50)
Appendix Ex. 2028
1 2 3 4 5 6 7 8 9 10 11 12 13 B BOSTON COFFEE COMPANY Cost of Production ReportRoasting Department For the Month Ended December 31, 2010 Units Units charged to production: Inventory in process, December 1 Received from materials storeroom Total units accounted for by the Roasting Department Units to be assigned cost: Transferred to finished goods in December Inventory in process, December 31 (80% completed) Total units to be assigned cost *80% 900 Whole Units 1,500 92,500 94,000 93,100 900 94,000 93,100 ___720* 93,820 A C
Equivalent Units of Production
A 1 2 Unit costs: 3 Total costs for December in Roasting Department 4 Total equivalent units 5 Cost per equivalent unit 6 Costs assigned to production: 7 Inventory in process, December 1 8 Costs incurred in December 9 Total costs accounted for by the Roasting Department 10 Costs allocated to completed and partially completed units: 11 Transferred to finished goods in December (93,100 units $6.00) 12 Inventory in process, December 31 (900 units 80% $6.00) 13 Total costs assigned by the Roasting Department
B Costs $ 562,920 93,820 $ 6.00 $ 3,600 559,320 $ 562,920 $ 558,600 4,320 $ 562,920
Appendix Ex. 2029
1 2 3 4 5 6 7 8 9 10 11 12 13 B CHOTA CARPET COMPANY Cost of Production ReportCutting Department For the Month Ended October 31, 2010 Units Units charged to production: Inventory in process, October 1 Received from Weaving Department Total units accounted for by the Cutting Department Units to be assigned cost: Transferred to finished goods in October Inventory in process, October 31 (10% completed) Total units to be assigned cost *10% 10,500 Whole Units 9,000 105,000 114,000 103,500 10,500 114,000 103,500 1,050* 104,550 A C
Equivalent Units of Production
A 1 2 Unit costs: 3 Total costs for October in Cutting Department 4 Total equivalent units 5 Cost per equivalent unit 6 Costs assigned to production: 7 Inventory in process, October 1 8 Costs incurred in October 9 Total costs accounted for by the Cutting Department 10 Costs allocated to completed and partially completed units: 11 Transferred to finished goods in October (103,500 units $11.00) 12 Inventory in process, October 31 (10,500 units 10% $11.00) 13 Total costs assigned by the Cutting Department
B Costs $1,150,050 104,550 $ 11.00 $ 75,000 1,075,050 $1,150,050 $1,138,500 11,550 $1,150,050
PROBLEMS Prob. 201A
1. a. Materials...................................................................... Accounts Payable................................................ b. Work in ProcessMaking Department................... Work in ProcessPacking Department.................. Factory OverheadMaking Department................. Factory OverheadPacking Department............... Materials................................................................ c. Work in ProcessMaking Department................... Work in ProcessPacking Department.................. Factory OverheadMaking Department................. Factory OverheadPacking Department............... Wages Payable..................................................... d. Factory OverheadMaking Department................. Factory OverheadPacking Department............... Accumulated Depreciation.................................. e. Factory OverheadMaking Department................. Factory OverheadPacking Department............... Prepaid Insurance................................................ f. Work in ProcessMaking Department................... Work in ProcessPacking Department.................. Factory OverheadMaking Department........... Factory OverheadPacking Department.......... g. Work in ProcessPacking Department.................. Work in ProcessMaking Department.............. h. Finished Goods.......................................................... Work in ProcessPacking Department............ i. Cost of Goods Sold................................................... Finished Goods.................................................... 153,200 153,200 101,200 35,200 3,960 1,420 141,780 72,300 48,800 14,000 25,100 160,200 13,200 10,900 24,100 2,500 1,000 3,500 34,500 38,120 34,500 38,120 208,600 208,600 328,300 328,300 329,500 329,500
Prob. 201A
2.
Concluded
Materials Balance, December 1..... Debits............................... Credits............................. Balance, December 31... 3. $ 2,700 153,200 (141,780) $ 14,120
Work in Process Making Dept. $ 4,780 208,000 (208,600) $ 4,180
Work in Process Packing Dept. $ 6,230 330,720 (328,300) $ 8,650
Finished Goods $ 12,300 328,300 (329,500) $ 11,100
Factory Overhead Making Dept. Balance, December 1....................... Debits................................................ Credits............................................... Balance, December 31..................... $ 0 33,660 (34,500) $ (840) Cr.
Factory Overhead Packing Dept. $ 0 38,420 (38,120) $ 300 Dr.
Prob. 202A
1.
A B C D 1 VENUS CHOCOLATE COMPANY 2 Cost of Production ReportBlending Department 3 For the Month Ended January 31, 2010 4 Equivalent Units 5 Units Whole Units Direct Materials Conversion 6 Units charged to production: 7 Inventory in process, January 1 6,000 8 Received from materials storeroom 240,000 Total units accounted for by the 9 Blending Department 246,000 10 Units to be assigned cost: Inventory in process, January 1 11 (3/5 completed) 6,000 0 2,4001 2 12 Started and completed in January 236,000 236,000 236,000 Transferred to Molding Department in 13 December 242,000 236,000 238,400 Inventory in process, January 31 14 (1/5 completed) 4,000 4,000 8003 15 Total units to be assigned cost 246,000 240,000 239,200 16 12/5 6,000 17 2242,000 6,000 18 31/5 4,000
Prob. 202A
Continued
C Costs Conversion D Total
A B 1 2 Costs Direct Materials 3 Unit costs: Total costs for January in Blending 4 Department $ 768,000 5 Total equivalent units 240,000 6 Cost per equivalent unit $ 3.20 7 Costs charged to production: 8 Inventory in process, January 1 9 Costs incurred in January Total costs accounted for by the 10 Blending Department Costs allocated to completed and partially 11 completed units: 12 Inventory in process, January 1 balance To complete inventory in process, 13 January 1 Cost of completed January 1 work in 14 process 15 Started and completed in January $ 755,2003 Transferred to Molding Department 16 in January 17 Inventory in process, January 31 12,8005 Total costs assigned by the Blending 18 Department 19 Costs transferred to Molding Department: $967,760 20 Work in process, January 31: 4,000 units at a cost of $13,440 21 1$768,000 + $153,200 + $38,160 22 22,400 units $0.80 23 3236,000 units $3.20 24 4236,000 units $0.80 25 54,000 units $3.20 26 6800 units $0.80
$ 191,360 239,200 $ 0.80 $ 21,840 959,3601
$ 981,200
$ $ 1,9202 $ 188,8004
21,840 1,920 23,760 944,000
6406
$ 967,760 13,440 $ 981,200
Prob. 202A
Concluded
2. Direct materials: Increase of $0.10 ($3.20 $3.10) Conversion: Decrease of $0.10 ($0.80 $0.90) Computations: Direct materials cost per equivalent unit: $3.10 ($18,600/6,000 units) Conversion cost per equivalent unit: $0.90 ($3,240*/3,600 units**) *Work in process, January 1.................................... Less direct materials cost....................................... Conversion cost included in January 1, work in process.................................................................. $ 21,840 18,600 $ 3,240
**Equivalent units in January 1, work in process (6,000 3/5) 3,600 units
Prob. 203A
1.
A B C D 1 WILMINGTON CHEMICAL COMPANY 2 Cost of Production ReportFilling Department 3 For the Month Ended December 31, 2010 4 Equivalent Units 5 Units Whole Units Direct Materials Conversion 6 Units charged to production: 7 Inventory in process, December 1 2,800 8 Received from Reaction Department 36,200 Total units accounted for by the 9 Filling Department 39,000 10 Units to be assigned cost: Inventory in process, December 1 11 (60% completed) 2,800 0 1,1201 2 12 Started and completed in December 33,100 33,100 33,100 Transferred to finished goods in 13 December 35,900 33,100 34,220 Inventory in process, December 31 14 (30% completed) 3,100 3,100 9303 15 Total units to be assigned cost 39,000 36,200 35,150 16 140% 2,800 17 235,900 2,800 18 330% 3,100
Prob. 203A
Continued
C Costs Conversion D Total
A B 1 2 Costs Direct Materials 3 Unit costs: Total costs for December in Filling 4 Department $ 521,280 5 Total equivalent units 36,200 6 Cost per equivalent unit $ 14.40 7 Costs charged to production: 8 Inventory in process, December 1 9 Costs incurred in December Total costs accounted for by the 10 Filling Department Costs allocated to completed and partially 11 completed units: 12 Inventory in process, December 1 balance To complete inventory in process, 13 December 1 Cost of completed December 1 work in 14 process 15 Started and completed in December $ 476,6403 Transferred to finished goods in 16 December 17 Inventory in process, December 31 44,6405 Total costs assigned by the Filling 18 Department 1 19 $521,280 + $167,900 + $166,025 20 21,120 units $9.50 21 333,100 units $14.40 22 433,100 units $9.50 23 53,100 units $14.40 24 6930 units $9.50
$ 333,925 35,150 $ 9.50 $ 56,420 855,2051 $ 911,625
$ 56,420 $ 10,6402 10,640 $ 67,060 791,090 $ 858,150 53,475 $ 911,625
314,4504
8,8356
2.
Work in ProcessFilling Department........................... Work in ProcessReaction Department................ Finished Goods............................................................... Work in ProcessFilling Department.....................
521,280 521,280 858,150 858,150
3. Direct materials: $0.20 decrease ($14.40 $14.60) Conversion: $0.25 increase ($9.50 $9.25)
Prob. 203A
Concluded
4. The cost of production report may be used as the basis for allocating product costs between Work in Process and Finished Goods. The report can also be used to control costs by holding each department head responsible for the units entering production and the costs incurred in the department. Any differences in unit product costs from one month to another, such as those in part (3), can be studied carefully and any significant differences investigated.
Prob. 204A
1. and 2.
Date
June 1 30 30 30 30 30 July 31 31 31 31 31
Work in ProcessRolling Department
Item
Bal., 3,000 units, 1/4 completed Smelting Dept., 42,000 units at $14.20/unit Direct labor Factory overhead Finished goods Bal., 4,500 units, 4/5 completed Smelting Dept., 45,000 units at $14.50 Direct labor Factory overhead Finished goods Bal., 6,000 units, 2/5 completed
Dr.
Cr.
Dr.
Balance Cr.
48,225 596,400 212,435 156,040 918,600* 644,625 857,060 1,013,100 94,500 94,500 652,500 219,900 160,800 1,019,100* 747,000 966,900 1,127,700 108,600 108,600
*The credits are determined from the supporting cost of production reports.
Prob. 204A
1 2 3 4
Continued
A
B C D PITTSBURGH ALUMINUM COMPANY Cost of Production ReportRolling Department For the Month Ended June 30, 2010 Equivalent Units Direct Materials Conversion 5 Units Whole Units (a) (a) 6 Units charged to production: 7 Inventory in process, June 1 3,000 8 Received from Smelting Department 42,000 Total units accounted for by the 9 Rolling Department 45,000 10 Units to be assigned cost: Inventory in process, June 1 11 (1/4 completed) 3,000 2,2501 2 12 Started and completed in June 37,500 37,500 37,500 Transferred to finished goods in 13 June 40,500 37,500 39,750 Inventory in process, June 30 14 (4/5 completed) 4,500 4,500 3,6003 15 Total units to be assigned cost 45,000 42,000 43,350 1 16 3/4 3,000 17 242,000 4,500 18 34/5 4,500
Prob. 204A
Continued
B Direct Materials C Costs Conversion D Total
A 1 2 Costs 3 Unit costs: Total costs for June in Rolling 4 Department 5 Total equivalent units 6 Cost per equivalent unit (b) 7 Costs charged to production: 8 Inventory in process, June 1 9 Costs incurred in June Total costs accounted for by the 10 Rolling Department Costs allocated to completed and partially 11 completed units: Inventory in process, June 1 12 balance (c) To complete inventory in process, 13 June 1 (c) Cost of completed June 1 work in pro14 cess 15 Started and completed in June (c) Transferred to finished goods in 16 June (c) 17 Inventory in process, June 30 (d) Total costs assigned by the Rolling 18 Department 19 1$596,400 + $212,435 + $156,040 20 22,250 units $8.50 21 337,500 units $14.20 22 437,500 units $8.50 23 54,500 units $14.20 24 63,600 units $8.50
$ 596,400 42,000 $ 14.20
$ 368,475 43,350 $ 8.50 $ 48,225 964,8751
$1,013,100
$ $ 0 $ 19,1252 $ 532,5003 318,7504
48,225 __ __19,125 67,350 851,250
63,900
5
30,600
6
$ 918,600 __ 94,500 $1,013,100
Prob. 204A
2.
Continued
B C D PITTSBURGH ALUMINUM COMPANY Cost of Production ReportRolling Department For the Month Ended July 31, 2010 Equivalent Units Direct Materials Conversion 5 Units Whole Units (a) (a) 6 Units charged to production: 7 Inventory in process, July 1 4,500 8 Received from Smelting Department 45,000 Total units accounted for by the 9 Rolling Department 49,500 10 Units to be assigned cost: Inventory in process, July 1 4,5 9 11 (4/5 completed) 00 001 12 Started and completed in July 39,0002 39,000 39,000 Transferred to finished goods in 39,9 13 July 43,500 39,000 00 Inventory in process, July 31 _2, 14 (2/5 completed) _6,000 6,000 4003 15 Total units to be assigned cost 49,500 45,000 42,300 1 16 1/5 4,500 17 245,000 6,000 18 32/5 6,000 1 2 3 4
A
Prob. 204A
Concluded
B Direct Materials C Costs Conversion D Total
A 1 2 Costs 3 Unit costs: Total costs for July in Rolling 4 Department 5 Total equivalent units 6 Cost per equivalent unit (b) 7 Costs charged to production: 8 Inventory in process, July 1 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Costs incurred in July Total costs accounted for by the Rolling Department Costs allocated to completed and partially completed units: Inventory in process, July 1 balance (c) To complete inventory in process, July 1 (c) Cost of completed July 1 work in process Started and completed in July (c) Transferred to finished goods in July (c) Inventory in process, July 31 (d) Total costs assigned by the Rolling Department 1 $652,500 + $219,900 + $160,800 2 900 units $9.00 3 39,000 units $14.50 4 39,000 units $9.00 5 6,000 units $14.50 6 2,400 units $9.00
$ 652,500 45,000 $ 14.50
$ 380,700 42,300 $ 9.00 $ 94,500
1,033,2001 $1,127,700
$ $ 0 565,5003 87,0005 $ 8,1002 351,0004 21,6006
94,500
8,100 $ 102,600 916,500 $1,019,100 108,600 $1,127,700
3. The cost per equivalent unit for direct materials increased from $14.00 in May to $14.20 in June to $14.50 in July. The cost per equivalent unit for conver sion costs increased from $8.30 in May to $8.50 in June, and to $9.00 in July. These increases should be investigated for their underlying causes, and any necessary corrective actions should be taken.
Appendix Prob. 205A
1 2 3 4 5 6 7 8 9 10 11 12 13 B OLDE STONE MILL FLOUR COMPANY Cost of Production ReportSifting Department For the Month Ended December 31, 2010 Units Units charged to production: Inventory in process, December 1 Received from Milling Department Total units accounted for by the Sifting Department Units to be assigned cost: Transferred to Packaging Department in December Inventory in process, December 31 (75% completed) Total units to be assigned cost *75% 900 Whole Units 1,200 14,500 15,700 A C
Equivalent Units of Production
14,800 900 15,700
14,800 675* 15,475
A 1 2 Unit costs: 3 Total costs for December in Sifting Department 4 Total equivalent units 5 Cost per equivalent unit 6 Costs charged to production: 7 Inventory in process, December 1 8 Costs incurred in December 9 Total costs accounted for by the Sifting Department 10 Costs allocated to completed and partially completed units: 11 Transferred to Packaging Department in December (14,800 units $5.00) 12 Inventory in process, December 31 (900 75% $5.00) 13 Total costs assigned by the Sifting Department 14 *$4,500 + $51,400 + $14,350 + $7,125 15 **$51,400 + $14,350 + $7,125
B Costs $77,375* 15,475 $ 5.00 $ 4,500 72,875** $77,375 $74,000 3,375 $77,375
Prob. 201B
1. a. Materials...................................................................... Accounts Payable................................................ b. Work in ProcessSpinning Department................ Work in ProcessTufting Department................... Factory OverheadSpinning Department.............. Factory OverheadTufting Department................. Materials................................................................ c. Work in ProcessSpinning Department................ Work in ProcessTufting Department................... Factory OverheadSpinning Department.............. Factory OverheadTufting Department................. Wages Payable..................................................... d. Factory OverheadSpinning Department.............. Factory OverheadTufting Department................. Accumulated Depreciation.................................. e. Factory OverheadSpinning Department.............. Factory OverheadTufting Department................. Prepaid Insurance................................................ f. Work in ProcessSpinning Department................ Work in ProcessTufting Department................... Factory OverheadSpinning Department........ Factory OverheadTufting Department........... g. Work in ProcessTufting Department................... Work in ProcessSpinning Department........... h. Finished Goods.......................................................... Work in ProcessTufting Department.............. i. Cost of Goods Sold................................................... Finished Goods.................................................... 825,300 825,300 547,200 215,300 44,200 16,900 823,600 234,700 189,900 124,200 110,000 658,800 56,700 32,500 89,200 12,000 9,000 21,000 235,600 169,800 235,600 169,800 1,021,600 1,021,600 1,590,200 1,590,200 1,600,700 1,600,700
Prob. 201B
2.
Concluded
Materials Balance, July 1.......... Debits.......................... Credits........................ Balance, July 31........ 3. $ 41,100 825,300 (823,600) $ 42,800
Work in Work in Process Process Spinning Dept. Tufting Dept. $ 8,500 1,017,500 (1,021,600) $ 4,400 $ 23,600 1,596,600 (1,590,200) $ 30,000
Finished Goods $ 51,200 1,590,200 (1,600,700) $ 40,700
Factory Overhead Spinning Dept. Balance, July 1....................... Debits....................................... Credits..................................... Balance, July 31..................... $ 0 237,100 (235,600) $ 1,500 Dr.
Factory Overhead Tufting Dept. $ 0 168,400 (169,800) $ (1,400) Cr.
Prob. 202B
1.
A B C D 1 ARIBA COFFEE COMPANY 2 Cost of Production ReportRoasting Department 3 For the Month Ended March 31, 2010 4 Equivalent Units 5 Units Whole Units Direct Materials Conversion 6 Units charged to production: 7 Inventory in process, March 1 10,500 8 Received from materials storeroom 156,000 Total units accounted for by the 9 Roasting Department 166,500 10 Units to be assigned cost: Inventory in process, March 1 11 (30% completed) 10,500 0 7,3501 12 Started and completed in March 145,1002 145,100 145,100 Transferred to Packing Department in 13 March 155,600 145,100 152,450 Inventory in process, March 31 14 (40% completed) 10,900 10,900 4,3603 15 Total units to be assigned cost 166,500 156,000 156,810 1 16 70% 10,500 17 2155,600 10,500 18 340% 10,900
Prob. 202B
Continued
B Direct Materials C Costs Conversion D Total
A 1 2 Costs 3 Unit costs: Total costs for March in Roasting 4 Department 5 Total equivalent units 6 Cost per equivalent unit 7 Costs charged to production: 8 Inventory in process, March 1 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 Costs incurred in March
$ 780,000 156,000 $ 5.00
$ 235,215 156,810 $ 1.50 $ 59,640
1,015,2151 $1,074,855
Total costs accounted for by the Roasting Department Costs allocated to completed and partially completed units: Inventory in process, March 1 balance To complete inventory in process, March 1 $ 0 Cost of completed March 1 work in process Started and completed in March 725,5003 Transferred to Packing Department in March Inventory in process, March 31 54,5005 Total costs assigned by the Roasting Department Costs transferred to Packing Department: $1,013,815 Work in process, March 31: 10,900 units at a cost of $61,040 1 $780,000 + $142,225 + $92,990 2 7,350 units $1.50 3 145,100 units $5.00 4 145,100 units $1.50 5 10,900 units $5.00 6 4,360 units $1.50
$ $ 11,0252 $ 217,6504
59,640 11,025 70,665 943,150
6,5406
$1,013,815 61,040 $1,074,855
Prob. 202B
Concluded
2. Direct materials cost decreased from $5.20 in February to $5.00 in March. Conversion cost decreased from $1.60 in February to $1.50 in March. Computations: Direct materials: $5.20 ($54,600/10,500 units) Conversion: $1.60; determined as follows: March 1, work in process........................................ $ 59,640 Less direct materials................................................ 54,600 Conversion costs..................................................... $ 5,040 Conversion cost equivalent units: (10,500 30%) = 3,150 units Conversion cost per equivalent unit: $1.60 ($5,040/3,150)
Prob. 203B
1.
A B C D 1 ANGEL WHITE FLOUR COMPANY 2 Cost of Production ReportSifting Department 3 For the Month Ended August 31, 2010 4 Equivalent Units 5 Units Whole Units Direct Materials Conversion 6 Units charged to production: 7 Inventory in process, August 1 12,000 8 Received from Milling Department 320,000 Total units accounted for by the 9 Sifting Department 332,000 10 Units to be assigned cost: Inventory in process, August 1 11 (3/5 completed) 12,000 0 4,8001 12 Started and completed in August 311,0002 311,000 311,000 Transferred to Packaging Department 13 in August 323,000 311,000 315,800 Inventory in process, August 31 14 (4/5 completed) 9,000 9,000 7,2003 15 Total units to be assigned cost 332,000 320,000 323,000 1 16 2/5 12,000 17 2320,000 9,000 18 34/5 9,000
Prob. 203B
Continued
B Direct Materials $ 784,000 320,000 $ 2.45 C Costs Conversion $ 209,950 323,000 $ 0.65 $ 33,240 993,9501 D Total
A 1 2 Costs 3 Unit costs: Total costs for August in Sifting 4 Department 5 Total equivalent units 6 Cost per equivalent unit 7 Costs charged to production: 8 Inventory in process, August 1 9 Costs incurred in August Total costs accounted for by the 10 Sifting Department Costs allocated to completed and partially 11 completed units: 12 Inventory in process, August 1 balance To complete inventory in process, 13 August 1 Cost of completed August 1 work in 14 process 15 Started and completed in August Transferred to Packaging Department 16 in August 17 Inventory in process, August 31 Total costs assigned by the Sifting 18 Department 19 1$784,000 + $179,000 + $30,950 20 24,800 units $0.65 21 3311,000 units $2.45 22 4311,000 units $0.65 23 59,000 units $2.45 24 67,200 units $0.65
$1,027,190
$ $ 3,1202 $ $ 761,9503 202,1504
33,240 3,120 36,360 964,100
22,0505
4,6806
$1,000,460 _ 26,730 $1,027,190
2.
Work in ProcessSifting Department.......................... Work in ProcessMilling Department.................... Work in ProcessPackaging Department................... Work in ProcessSifting Department....................
784,000 784,000 1,000,460 1,000,460
3. Direct materials: $0.10 increase ($2.45 $2.35) Conversion: $0.05 decrease ($0.65 $0.70)
Prob. 203B
Concluded
4. The cost of production report may be used as the basis for allocating product costs between Work in Process and Transferred-Out (or Finished) Goods. The report can also be used to control costs by holding each depart ment head responsible for the units entering production and the costs in curred in the department. Any differences in unit product costs from one month to another, such as those in part (3), can be studied carefully and any significant differences investigated.
Prob. 204B
1. and 2.
Date
Feb . 1 28 28 28 28 28 Mar . 31 31 31 31 31
Work in ProcessFilling Department
Item
Bal., 3,200 units, 30% completed Cooking Dept., 65,900 units at $4.60 Direct labor Factory overhead Finished goods Bal., 2,500 units, 90% completed Cooking Dept., 73,500 units at $4.80 Direct labor Factory overhead Finished goods Bal., 4,000 units, 35% completed
Dr.
Cr.
Dr.
Balance Cr.
16,320 303,140 87,450 61,908 452,368* 319,460 406,910 468,818 16,450 16,450 352,800 103,345 74,530 524,425* 369,250 472,595 547,125 22,700 22,700
*The credits are determined from the supporting cost of production reports.
Prob. 204B
1 2 3 4
Continued
A
B C D HEARTY SOUP CO. Cost of Production ReportFilling Department For the Month Ended February 28, 2010 Equivalent Units Direct Materials Conversion 5 Units Whole Units (a) (a) 6 Units charged to production: 7 Inventory in process, February 1 3,200 8 Received from Cooking Department 65,900 Total units accounted for by the 9 Filling Department 69,100 10 Units to be assigned cost: Inventory in process, February 1 2,240 11 1 (30% completed) 3,200 2 12 Started and completed in February 63,400 63,400 63,400 Transferred to finished goods in 13 February 66,600 63,400 65,640 Inventory in process, February 28 _2,2 14 (90% completed) 2,500 2,500 503 15 Total units to be assigned cost 69,100 65,900 67,890 1 16 70% 3,200 17 265,900 2,500 18 390% 2,500
Prob. 204B
Continued
B Direct Materials C Costs Conversion D Total
A 1 2 Costs 3 Unit costs: Total costs for February in Filling 4 Department 5 Total equivalent units 6 Cost per equivalent unit (b) 7 Costs charged to production: 8 Inventory in process, February 1 9 Costs incurred in February Total costs accounted for by the 10 Filling Department Costs allocated to completed and partially 11 completed units: Inventory in process, February 1 12 balance (c) To complete inventory in process, 13 February 1 (c) Cost of completed February 1 work in 14 process 15 Started and completed in February (c) Transferred to finished goods in 16 February (c) 17 Inventory in process, February 28 (d) Total costs assigned by the Filling 18 Department 19 1$303,140 + $87,450 + $61,908 20 22,240 units $2.20 21 363,400 units $4.60 22 463,400 units $2.20 23 52,500 units $4.60 24 62,250 units $2.20
$ 303,140 65,900 $ 4.60
$ 149,358 67,890 $ 2.20 $ 16,320 452,4981 $468,818
$ 16,320 4,92 82 4,928 $ 21,248 431,120 $452,36 8 16,450 $468,818
$ 291,6403
139,4804
11,5005
4,9506
Prob. 204B
2.
Continued
B C D HEARTY SOUP CO. Cost of Production ReportFilling Department For the Month Ended March 31, 2010 Equivalent Units Direct Materials Conversion 5 Units Whole Units (a) (a) 6 Units charged to production: 7 Inventory in process, March 1 2,500 8 Received from Cooking Department 73,500 Total units accounted for by the 9 Filling Department 76,000 10 Units to be assigned cost: Inventory in process, March 1 250 11 1 (90% completed) 2,500 2 12 Started and completed in March 69,500 69,500 69,500 Transferred to finished goods in 13 March 72,000 69,500 69,750 Inventory in process, March 31 _1 14 (35% completed) 4,000 4,000 ,4003 15 Total units to be assigned cost 76,000 73,500 71,150 16 110% 2,500 17 273,500 4,000 18 335% 4,000 1 2 3 4
A
Prob. 204B
Concluded
C Costs Conversion D Total
A B 1 2 Costs Direct Materials 3 Unit costs: Total costs for March in Filling 4 Department $ 352,800 5 Total equivalent units 73,500 6 Cost per equivalent unit (b) $ 4.80 7 Costs charged to production: 8 Inventory in process, March 1 9 Costs incurred in March Total costs accounted for by the 10 Filling Department Costs allocated to completed and partially 11 completed units: 12 Inventory in process, March 1 balance (c) To complete inventory in process, 13 March 1 (c) $ 0 Cost of completed March 1 work in 14 process 15 Started and completed in March (c) 333,6003 16 Transferred to finished goods in March (c) 17 Inventory in process, March 31 (d) 19,2005 Total costs assigned by the Filling 18 Department 19 1$352,800 + $103,345 + $74,530 20 2250 units $2.50 21 369,500 units $4.80 22 469,500 units $2.50 23 54,000 units $4.80 24 61,400 units $2.50
$ 177,875 71,150 $ 2.50 $ 16,450 530,6751 $ 547,125
$ 16,450 $ 6252 625 $ 17,075 507,350 $ 524,425 22,700 $ 547,125
173,7504 3,5006
3. The cost per equivalent unit for direct materials increased from $4.50 in January to $4.60 in February to $4.80 in March. Similarly, the cost per equi valent unit for conversion costs increased from $2.00 in January to $2.20 in February to $2.50 in March. These increases should be investigated for their underlying causes, and any necessary corrective actions should be taken.
Appendix Prob. 205B
1 2 3 4 5 6 7 8 9 10 11 12 13 14 B STARBURST COFFEE COMPANY Cost of Production ReportRoasting Department For the Month Ended January 31, 2010 Units Units charged to production: Inventory in process, January 1 Received from materials storeroom Total units accounted for by the Roasting Department Units to be assigned cost: Transferred to Packing Department in January Inventory in process, January 31 (60% completed) Total units to be assigned cost *74,600 66,800 **60% 7,800 Whole Units 9,400 65,200 74,600 66,800 7,800* 74,600 66,800 4,680** 71,480 A C
Equivalent Units of Production
A 1 2 Unit costs: 3 Total costs for January in Roasting Department 4 Total equivalent units 5 Cost per equivalent unit 6 Costs charged to production: 7 Inventory in process, January 1 8 Costs incurred in January 9 Total costs accounted for by the Roasting Department 10 Costs allocated to completed and partially completed units: 11 Transferred to Packing Department in January (66,800 units $4.90) 12 Inventory in process, January 31 (7,800 units 60% $4.90) 13 Total costs assigned by the Roasting Department 14 *$135,600 + $109,152 + $67,900
B Costs $350,252 71,480 $ 4.90 $ 37,600 312,652* $350,252 $327,320 22,932 $350,252
SPECIAL ACTIVITIES Activity 201
This case comes from a real story. In the real story, the first reduction in chips had no impact on the marketplace. The manager was promoted, and the next manager attempted the same strategyreduce chips by 10%. Again, it worked. The next manager did the same thing. All of a sudden, the market demand dropped for the cookie. A threshold was reached, and the cookie was in trouble in the marketplace. The current cookie was nothing like the original recipe. The cookies integrity was slowly eroded until it wasnt Full of Chips. The company had no idea this was happening, since it occurred slowly over a period of many years. Now, with respect to the controller, there are a number of options. a. Do nothing . This is a safe strategy. It would be highly unlikely that failing to reveal this information to anybody would ever be discovered or pinned on you. Unfortunately, this is one of those situations where silence has very little penalty, yet speaking up entails some risk. However, silence may not be the best option. Silence may allow the product quality erosion to continue, which could be harmful to the company. b. Talk to Lee. You can have a conversation with Lee. This is also a reasonably safe strategy and probably the best start. For example, you may discover that the reduction in chips was okayed by the vice president or that there was a market study that revealed that the market thought the cookie had too many chips. This kind of information could be discovered very easily and without any risk through a personal conversation with Lee. c. Talk to the vice president . You could also go right over Lees head to the vice president. This strategy might label you as not a team player, so some care is in order here. You might get Lee in trouble, or you may get yourself in some trouble. This is probably not the best first move. It is within Lees authority to make the chip decision, so you are, in a sense, second-guessing Lee when you go to the vice president. You could be accused of being out of your expertise. After all, what do you know about chips and the marketplace? Probably the best move is to talk to Lee. If you discover that Lee is acting on his own, with the primary motivation being to improve the bottom line, then you may need to talk to the vice president. This is a delicate situation. You would need to make your case that the reduction in chips strikes you as a short-term decision that may have short-term benefits but may be a poor long-term decision. Again, Lee has the prerogative to make the chip decision; so in a sense, you are second-guessing Lee. Your objections should be done lightly and with care.
Activity 202
a. This accounting procedure has the effect of rewarding the production of broke. In essence, the procedure communicates to operating personnel that broke is a normal part of doing business. In fact, not only is broke a normal part of business, but its production is actually attractive because of the favorable impact on direct materials costs of the papermaking operation. Re cording broke as acceptable and favorable is inconsistent with a total quality perspective, which is based on the concept of producing the product right the first time, every time. Recycling is considered non-value-added in the context of a total quality perspective. b. The accounting for broke that is typical in the industry fails to account for the total impact of broke. It is true that the use of recycled materials may reduce the direct materials cost to the operation. However, such a view is very lim- ited. For example, the production of broke has a cost. Machine capacity was used to produce the broke in the first place. Therefore, broke has an original materials cost and a machine cost. Both of these together are likely to be greater than the cost of virgin material. One mill manager once commen ted, There is a free paper machine out there. What he was implying is that if all the machine capacity used to produce broke could be harnessed for good production, it would have been equal to a free paper machine. The cost of misused capacity is not captured by most accounting systems in the accounting for broke. There are other hidden costs. Broke production makes the total amount produced difficult to predict. As a result of this source of variation (broke), production schedules are difficult to maintain. For example, if a particular production run has a high amount of broke, then the scheduled run will need to be longer. The longer run, however, has ripple effects throughout the mill, since all the following production runs will be delayed, as will downstream operations. Also, the complete recycle operation has a cost associated with it (flow control, piping, maintenance, etc.). Typical accounting systems ag gregate the cost of the recycle operation with papermaking. Therefore, it is not made visible as a source of wasted resources.
Activity 203
This case is abstracted from a real situation, where higher raw materials costs due to tin content were more than offset by lower energy costs. The cost system used in the real situation was a sophisticated real-time expense tracking sys tem. The subtlety of this trade-off analysis is impressive. The first step is to translate the monthly materials and energy costs into their respective costs per unit of monthly production. In this way, the costs can be compared across the months. Energy cost per unit.......... Materials cost per unit....... $0.26 0.24 $0.50 $0.24 0.25 $0.49 $0.22 0.26 $0.48 $0.20 0.27 $0.47 $0.18 0.28 $0.46 $0.15 0.29 $0.44
The graph below shows the total unit cost data for each month.
$0.60 $0.50 $0.40 $0.30 $0.20 $0.10 $0.00 Apr. May June July
Month
Total cost per unit Materials cost per unit Energy cost per unit
Aug. Sept.
The graph reveals that the tin content and energy costs are inversely related. That is, as the materials cost increased due to higher tin content, the energy costs dropped by more. In fact, the total cost line shows that the energy savings exceeds the additional materials cost, due to higher tin content. Thus, the recommendation should be to purchase raw can stock with the tin content at the $0.29-per-unit level (September level). This is the material that minimizes the total production cost for this set of data. Additional data could be used to de termine the optimal tin content, or the point where energy cost savings fail to overcome additional material costs.
Activity 204
To: Duran Orr From: Alicia Sparks Re: Analysis of August Increase in Unit Costs for Papermaking Department The increase in the unit costs from July to August occurred for both the conversion and materials (pulp and chemicals) costs in the Papermaking Department, as indicated in the table below. Materials cost per ton................ Conversion cost per ton............ Total............................................. July $250.00 125.00 $375.00 August $266.96 133.04 $400.00
An analysis was done to isolate the cause of the increased cost per ton. My in terviews indicated that there were two possible causes. First, we changed the specification of the green paper in early August. This may have altered the way the paper machines process the green paper. Thus, it is possible that the paper machines have improper settings for the new specification and are overapplying materials. Secondly, there is some question as to whether paper machine 1 is in need of some repairs. It is possible that our problem is due to lack of repairs on this machine. Fortunately, we run both colors on paper machine 1. Thus, we can separate the analysis between these two possible explanations. I have provided the following cost per ton data for the two paper machines and the two product colors: Paper machine analysis: Materials Cost per Ton Paper machine 1......................... Paper machine 2......................... Product color analysis: Materials Cost per Ton Green............................................ Yellow.......................................... $266.10 267.86 Conversion Cost per Ton $132.20 133.93 $287.32 247.63 Conversion Cost per Ton $142.86 123.73
Activity 204
Concluded
The results are clear. Paper machine 1 has a much higher materials and conversion cost per ton in August. Apparently, the paper machine is overapplying pulp. This is resulting in an increase in both the materials and conversion cost per ton. Paper machine 2 is running at a cost slightly better than our historical cost per ton. There is no evidence of a color problem. Both color papers are running at or near the same materials and conversion cost per ton. Thus, the specification change for green has not appeared to cause a problem in the papermaking operation. I predict that if we improve the operation of paper machine 1, we will be able to run the department near the historical average cost per ton. Note to Instructors: The paper machine and product line analysis are determined by summarizing the data from the computer run provided in the problem. Students must divide costs by ton-volume for each paper machine and then do the same thing for each product color. The tables in the memo show the results of the following analysis ( a spreadsheet is recommended for performing this ana lysis): Average materials cost per ton for paper machine 1: ($38,500 + $41,700 + $44,600 + $36,100) (150 + 140 + 150 + 120) = $287.32 Average conversion cost per ton for paper machine 1: ($18,200 + $21,200 + $22,500 + $18,100) (150 + 140 + 150 + 120) = $142.86 Average materials cost per ton for paper machine 2: ($38,300 + $38,600 + $35,600 + $33,600) (160 + 160 + 130 + 140) = $247.63 Average conversion cost per ton for paper machine 2: ($18,900 + $18,700 + $18,400 + $17,000) (160 + 160 + 130 + 140) = $123.73 Average materials cost per ton for green paper: ($38,500 + $44,600 + $38,300 + $35,600) (150 + 150 + 160 + 130) = $266.10 Average conversion cost per ton for green paper: ($18,200 + $22,500 + $18,900 + $18,400) (150 + 150 + 160 + 130) = $132.20 Average materials cost per ton for yellow paper: ($41,700 + $36,100 + $38,600 + $33,600) (140 + 120 + 160 + 140) = $267.86 Average conversion cost per ton for yellow paper: ($21,200 + $18,100 + $18,700 + $17,000) (140 + 120 + 160 + 140) = $133.93
Activity 205
This activity can be accomplished with multiple groups assigned to one or more of the industry categories. Assign at least one group to each industry category (some are easier than others, so some groups may be assigned multiple categories). Have the groups report their research back to the class. The classs final product should be a table identifying a company, products, materials, and pro cesses used by these industries. The most difficult information to obtain is the processes and the materials used in the processes. However, Internet and annu al report information provide good information for answers. The text problems also provide examples of processes used in these industries. Use this case to fa miliarize students with process industries. Note that a set of example companies is provided for these industry categories early in the chapter. The instructor may require that the groups select different companies than those already listed in the text. A suggested solution following this approach is provided on the next page.
Activity 205
Industry Category
Beverages
Concluded
Example Company
PepsiCo, Inc.
Products
Pepsi, Diet Pepsi
Materials
Sugar, carbonated water, concentrate Petroleum and petroleum-based intermediates (esters and olefins) Tomato, sugar, salt, spices Wood, wood chips, water, sulfuric acid
Processes
Mixing, bottling
Chemicals
E. I. du Pont de Nemours and Company
Stainmaster, Kevlar, Lycra, Teflon, refrigerants, electronic materials Ketchup
Reaction, blending, distilling, extruding
Food
H.J. Heinz Company
Cooking, blending, packaging Chipping, pulping, papermaking, pressing, cutting Melting, casting, rolling Catalytic converting, distilling Blending, distilling, packing, pelletizing Making, column blowing, packing
Forest & paper products
International Paper Company
Paper, paperboard, cardboard
Metals
AK Steel Company BP
Steel
Iron ore, coke
Petroleum refining
Gasoline, diesel, kerosene Prozac, Humulin
Oil
Pharmaceuticals
Eli Lilly and Company
Hydrochloride
Soap and cosmetics
Unilever
Lever 2000 soap
Fatty acids, water, fragrances