Chapter06 Solutions-Hansen6e

107 614 1 journal entries a work in processassembly

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6–14 1. Journal entries: a. Work in Process—Assembly ............. 24,000 Materials Inventory .......................... 24,000 b. Work in Process—Assembly ............. 4,600 Work in Process—Finishing .............. 3,200 Wages Payable ................................ 7,800 c. Work in Process—Assembly ............. 5,000 Work in Process—Finishing .............. 4,000 Overhead Control ............................ 9,000 d. Work in Process—Finishing .............. 32,500 Work in Process—Assembly ......... 32,500 e. Finished Goods ................................... 20,500 Work in Process—Finishing .......... 20,500 f. Overhead Control ................................ 10,000 Miscellaneous Accounts ................ 10,000 g. (optional entry) Cost of Goods Sold ............................ 1,000 Overhead Control ............................ 1,000 2. Work in Process—Assembly: $24,000 4,600 5,000 (32,500 ) $ 1,100 ending inventory Work in Process—Finishing: $ 3,200 4,000 32,500 (20,500 ) $ 19,200 ending inventory 108
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6–15 1. For operation costing to be appropriately applied, products must be produced in batches where there are significant differences in direct materials costs but similar demands on conversion resources. This company produces in batches, and it seems reasonable that the products would make similar de- mands on the conversion resources for the operations used. Thus, for opera- tion costing to be used, the cost of direct materials must differ significantly per pound of output—whether the output is loaves, buns, or rolls. For ex- ample, if the direct materials for a 7,500-pound batch of 1.6-pound loaves of wheat bread differ significantly in cost from the direct materials for a 7,500- pound batch of 0.6-pound packages of hamburger buns (consisting of eight buns per package), then operation costing is likely to be needed. Thus, job- order costing procedures to assign direct materials costs and process-cost- ing procedures to assign conversion costs (for each operation) would be ap- propriate. However, if the cost of direct materials per pound of dough produced is about the same, then process costing could be used. Output could be measured in pounds for all operations, and the costing procedures would be much sim- pler. The use of the FIFO or weighted average method is not an issue for this setting. The inventory is perishable, so there would never be significant levels of work-in-process inventories. 2. A work order would be needed for each batch, which identifies the direct ma- terials, operations, and size of batches. The batch of whole wheat loaves would use all operations, but the batch of dinner rolls would not use the sli- cing operation. The cost of direct materials would be traced to each batch us- ing job procedures. (Materials requisition forms would identify the type of batch, quantities, and type of direct materials assigned to each batch and the associated cost.) Conversion rates for each process would be used to assign conversion costs. For example, for baking, the cost of energy, depreciation, other overhead, and labor would be assigned by multiplying a predetermined conversion rate by the batch’s baking time. The same application approach would be used for each operation, although some of the lesser operations such as rising and cooling may not use many resources, and they may need to be combined with more significant operations. For example, cooling and packaging could be defined as one operation.
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