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Week 6 Principles of accounting P6-2, P6-9, P6-11


Week 6 Principles of accounting P6-2, P6-9, P6-11

P6-2 On December 1, Stone Mountain Production Company had a work in process inventory of 1,200 units that were complete as to materials and 50% complete as to labor and overhead. December 1 costs follow:

Materials.........$6,000
Labor..............2,000
Overhead.........2,000

During December the following transactions occurred:
a. Purchased materials costing $50,000 on account.
b. Placed direct materials costing $49,000 into production.
c. Incurred production wages totaling $50,500.
d. Incurred overhead costs for December:

Depreciation..........$20,000
Utilities.................28,000 (cash payment)
Salaries.................11,000 (cash payment)
Supplies..................2,000 (from inventory)
 
e. Applied overhead to work in process at a predetermined rate of 125% of direct labor cost. f. Completed and transferred 10,000 units to Finished Goods. (Hint: You should first compute equivalent units and unit costs.)

Stone Mountain uses an average cost system. The ending inventory of work in process consisted of 1,000 units that were completed as to materials and 25% complete as to labor and overhead.

Prepare the journal entries to record the above information for the month of December.

P6-9 Mt. Orab Manufacturing Company uses a process cost system. Its manufacturing operation is carried on in two departments: Machining and Finishing. The Machining Department uses the average cost method and the Finishing Department uses the FIFO cost method. Materials are added in both departments at the beginning of operation, but the added materials do not increase the number of units being processed. Units are lost in the Manufacturing Department throughout the production process, and inspection occurs at the end of the process. The lost units have no scrap value and are considered to be normal loss.

Production statistics for July show the following data:

Machining                                                                                                        Finishing
Units in process, July 1 (all material
   40% of labor and overhead)……………………………….                20,000

Units in process, July 1 (all material
   80% of labor and overhead)……………………………….                                                    40,000
Units started in production……………………………………             140,000
Units completed and transferred………………………….                   100,000
Units transferred from Machining………………………..                                                      100,000
Units completed and transferred to
   Finished goods……………………………………………………                                              100,000
Units in process, July 31 (all material,
   60% of labor and overhead)………………………………                40,000
Units in process, July 31 (all material,
   40% of labor and overhead)………………………………                                                     40,000
Units lost in production………………………………………..               20,000

Production Costs                                                                                  Machining             Finishing
Work in process, July 1:                    
    Materials……………………………………………………….              $40,000                     $110,000
    Labor…………………………………………………………..                 24,000                         60,000
    Factory overhead…………………………………………….                     8,000                         40,000
    Costs in Machining Department……………………..                                                          240,000
 
Costs incurred during month:
    Materials………………………………………………………….             280,000                       240,000
    Labor…………………………………………………………….              180,000                       160,000
    Materials……………………………………………………….                   60,000                         80,000

Required:
Prepare a cost of production summary for each department. (Round to three decimal places.)

P6-11Mega Oil Company transports crude oil to its refinery where it is processed into main products gasoline, kerosene, and diesel fuel, and by product base oil. The base oil is sold at the split-off for $500,000 of annual revenue, and the joint processing cost to the get the crude oil to split-off are $5,000,000. Additional information includes:

Product           Barrels produced         Cost of Split-off         Selling Price Per Barrel
Gasoline          500,000                       $2,000,000                  $25
Kerosene         100,000                       500,000                       30
Diesel fuel       250,000                       1,000,0000                  20
 
Determine the allocation of joint costs, using the relative sales value method, (Hint: Reduce the amount of the joint costs to be allocated by the amount of the by-product Revenue)

 
SOLUTION PREVIEW
Problem 6-9
Mt. Orab Manufacturing Company
Cost of Production Summary -- Machining Department
For the Month Ended July 31, 20--
Cost of work in process, beginning of month
 
 
 
 Materials
 
 $      40,000
 
 Labor 
 
         24,000
 
 Factory overhead
 
           8,000
 $      72,000
Cost of production for month:
 
 
 
 Materials
 
 $    280,000
 
 
 
File name: Week-6-Principles-of-accounting-P6-2-P6-9-P6-11.xls File type: application/vnd.ms-excel Price: $20