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# ch17sol - CHAPTER 17 PROCESS COSTING 17-16(25 min...

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CHAPTER 17 PROCESS COSTING 17-16 (25 min.) Equivalent units, zero beginning inventory. 1. Direct materials cost per unit (\$720,000 ÷ 10,000) \$ 72 Conversion cost per unit (\$760,000 ÷ 10,000) 76 Assembly Department cost per unit \$148 2a. Solution Exhibit 17-16A calculates the equivalent units of direct materials and conversion costs in the Assembly Department of International Electronics in February 2007. Solution Exhibit 17-16B computes equivalent unit costs. 2b. Direct materials cost per unit \$ 72 Conversion cost per unit 80 Assembly Department cost per unit \$152 3. The difference in the Assembly Department cost per unit calculated in requirements 1 and 2 arises because the costs incurred in January and February are the same but fewer equivalent units of work are done in February relative to January. In January, all 10,000 units introduced are fully completed resulting in 10,000 equivalent units of work done with respect to direct materials and conversion costs. In February, of the 10,000 units introduced, 10,000 equivalent units of work is done with respect to direct materials but only 9,500 equivalent units of work is done with respect to conversion costs. The Assembly Department cost per unit is, therefore, higher. SOLUTION EXHIBIT 17-16A Steps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units; Assembly Department of International Electronics for February 2007. (Step 2) (Step 1) Equivalent Units Physical Direct Conversion Flow of Production Units Materials Costs Work in process, beginning (given) 0 Started during current period (given) 10,000 To account for 10,000 Completed and transferred out during current period 9,000 9,000 9,000 Work in process, ending * (given) 1,000 1,000 × 100%; 1,000 × 50% 1,000 500 Accounted for 10,000 Work done in current period only 10,000 9,500 * Degree of completion in this department: direct materials, 100%; conversion costs, 50%. 17-1

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SOLUTION EXHIBIT 17-16B Compute Cost per Equivalent Unit, Assembly Department of International Electronics for February 2007. Total Production Costs Direct Materials Conversion Costs ( Step 3 )Costs added during February \$1,480,000 \$720,000 \$760,000 Divide by equivalent units of work done in current period (Solution Exhibit 17-l6A) ÷ 10,000 ÷ 9,500 Cost per equivalent unit \$ 72 \$ 80 17-17 (20 min.) Journal entries (continuation of 17-16). 1. Work in Process––Assembly 720,000 Accounts Payable 720,000 To record \$720,000 of direct materials purchased and used in production during February 2007 2. Work in Process––Assembly 760,000 Various accounts 760,000 To record \$760,000 of conversion costs for February 2007; examples include energy, manufacturing supplies, all manufacturing labor, and plant depreciation 3. Work in Process––Testing 1,368,000 Work in Process––Assembly 1,368,000 To record 9,000 units completed and transferred from Assembly to Testing during February 2007 at \$152 × 9,000 units = \$1,368,000 Postings to the Work in Process––Assembly account follow. Work in Process –– Assembly Department Beginning inventory, Feb. 1 0 3. Transferred out to 1. Direct materials 720,000 Work in Process––Testing 1,368,000 2. Conversion costs 760,000 Ending inventory, Feb. 29 112,000 17-2
17-18 (25 min.) Zero beginning inventory, materials introduced in middle of process.

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