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Suppl_Problems_Process Costing_08

Suppl_Problems_Process Costing_08 - 1 CMA1 PROCESS COSTING...

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CMA1 – PROCESS COSTING – SUPPLEMENTARY PROBLEMS – MULTIPLE DEPARTMENTS Supplementary Note - Process Costing with Second Department When the Production Report is for a processing department that is not the first department in the process, there is a separate cost category and unit category called Transferred-in Costs . This category is treated the same as the other categories (DM, DL, and MO) with a separate column in the EU calculations. Transferred in costs are always 100% complete when they are transferred in. Hence, when using the FIFO method, EU’s required to complete the transferred-in costs in WIP beginning will always be zero . Likewise, the WIP ending inventory for transferred in costs will always be 100% complete. In the third schedule, Costs to Account For , the second line becomes Costs Transferred in or Added this period with the transferred in-costs being in a separate Transferred-in column and the costs added this period being in the DM, DL, and MO columns. The transferred in costs and related EU’s become part of the cost per EU calculation. When preparing the Cost Reconciliation (Costs Accounted for as Follows Schedule ), one additional line and calculation under the WIP ending heading will be Transferred in cost , which will be equal to the number of transferred in EU’s in ending WIP from Schedule 2, times the cost per EU for transferred in costs (the others being the DM, DL, and MO components of ending WIP). Supplementary Problems - Second Department PROBLEM 30 - Weighted – average method (first department) Global Defense, Inc. is a manufacturer of military equipment. Its Halifax plant manufactures the Interceptor missile under contract to the Canadian government and friendly countries. All Interceptors go through an identical manufacturing process. Every effort is made to ensure that all Interceptors are identical and meet many demanding performances specifications. The product-costing system at the Halifax plant has a single direct cost category (direct materials) and a single indirect cost category (conversion costs). Each Interceptor passes through two departments – the Assembly Department and the Testing Department. Direct materials are added at the beginning of the process in Assembly. Conversion costs are added evenly throughout the two departments. When the Assembly Department finishes work on each Interceptor, it is immediately transferred to Testing. Global Defense uses the weighted-average method of process costing. Data for the Assembly Department for October 2009 are: Physical Units Direct Conversion (missiles) Materials Costs Work in process, October 1* 20 $ 460,000 $ 120,000 Started during October 2009 80 Completed during October 2009 90 Work in process, October 31 + 10 Costs are added during October 2009 $ 2,000,000 $ 935,000 1
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*Degree of completion: direct materials, ?%; conversion costs, 60% + Degree of completion: direct materials, ?%; conversion costs, 70% REQUIRED 1.
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