Chapter06 Solutions-Hansen6e

# Difference due to rounding 128 624 concluded costs

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**Difference due to rounding. 128

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6–24 Concluded Costs accounted for: Transferred Ending Work Out in Process Total Goods transferred out (194,000 × \$0.1099) .......................... \$21,321* \$ 21,321* Units, beginning work in process: Prior period ...................................... 222 222 Current period (2,000 × \$0.0245) .... 49 49 Ending work in process: Transferred in (6,000 × \$0.0775) ..... \$465* 465* Direct materials (6,000 × \$0.0079). . 47* 47* Conversion costs (2,400 × \$0.0245) 59 * 59 * Total costs accounted for .................... \$ 21,592 \$ 571 \$ 22,163 ** *Rounded. **Difference due to rounding. 6–25 1. Conversion cost rate (Mixing) = \$250,000/5,000 = \$50 per direct labor hour Conversion cost rate (Bottling) = \$400,000/20,000 = \$20 per machine hour Regular Strength Extra Strength Applied conversion costs: Mixing: \$50 × 12,000 × 1/60 ...................... \$10,000 \$50 × 18,000 × 1/60 ...................... \$15,000 Bottling: \$20 × 12,000 × 1/60 × 1/2 .............. \$ 2,000 \$20 × 18,000 × 1/60 × 1/2 .............. \$ 3,000 129
6–25 Concluded 2. Unit cost computation: Regular Strength Extra Strength Direct materials ...................................... \$ 9,000 \$15,000 Applied conversion costs: Mixing ................................................ 10,000 15,000 Tableting ........................................... 5,000 Encapsulating ................................... 6,000 Bottling .............................................. 2,000 3,000 Total manufacturing cost ...................... \$26,000 \$39,000 Units ........................................................ ÷ 12,000 ÷ 18,000 Unit cost ................................................. \$ 2.17 * \$ 2.17 * *Rounded. 3. Journal entries: Work in Process—Mixing ........................ 9,000 Materials Inventory .............................. 9,000 Work in Process—Mixing ........................ 10,000 Conversion Cost Control .................... 10,000 Work in Process—Tableting .................... 19,000 Work in Process—Mixing ................... 19,000 Work in Process—Tableting .................... 5,000 Conversion Cost Control .................... 5,000 Work in Process—Bottling ...................... 24,000 Work in Process—Tableting .............. 24,000 Work in Process—Bottling ...................... 2,000 Conversion Cost Control .................... 2,000 Finished Goods ........................................ 26,000 Work in Process—Bottling ................. 26,000 130

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6–26 1. Transferred Direct Conversion In Materials Costs Transferred out .............................. 330,000 330,000 330,000 Normal spoilage ............................. 20,000 20,000 20,000 Ending work in process ................. 50,000 50,000 40,000 Equivalent units ............................. 400,000 400,000 390,000 2. Transferred in = \$2,000,000/400,000 = \$5.00 Unit direct materials = \$600,000/400,000 = \$1.50 Unit conversion costs = \$780,000/390,000 = \$2.00 Total unit cost = \$5.00 + \$1.50 + \$2.00 = \$8.50 3. Cost of units transferred out = (\$8.50 × 330,000) + (\$8.50 × 20,000) = \$2,805,000 + \$170,000 = \$2,975,000 Note: Normal spoilage is added to the cost of goods transferred out. Cost of ending work in process: (\$5.00 × 50,000) + (\$1.50 × 50,000) + (\$2.00 × 40,000) = \$405,000 4. If all spoilage is abnormal, it would not be added to the cost of goods trans- ferred out. It would be assigned to a loss account and treated as a loss of the period. The following journal entry is required: Loss from Abnormal Spoilage ............................ 170,000 Work in Process—Design and Coloring ...... 170,000 Viewing all spoilage as abnormal is consistent with a total quality manage- ment view. All waste is bad and should be eliminated. There is no “normal waste.” 5. If there is 80% abnormal spoilage, then the cost of 16,000 units (\$8.50 × 16,000)—\$136,000—would be assigned to the abnormal loss account, and the cost of the other 4,000 units would be assigned to the cost of goods trans- ferred out (\$8.50 × 4,000), or \$34,000. 131
6–27 1. Physical flow schedule: Units to account for: Units, beginning work in process ...... 3,000 Units started ........................................ 7,000 Total units to account for ................... 10,000 Units accounted for: Units transferred out ........................... 8,000 Units spoiled ....................................... 1,000 Units, ending work in process ........... 1,000 Total units accounted for ................... 10,000 2. Equivalent Units Direct Conversion Materials Costs Transferred out ......................................... 8,000 8,000 Abnormal loss ........................................... 1,000 1,000 Ending work in process ........................... 1,000 250 * Total ........................................................ 10,000 9,250 *(1,000 × 25%).

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