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:
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)
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
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
$25
Kerosene
100,000
500,000
30
Diesel
fuel
250,000
1,000,0000
20
SOLUTION
PREVIEW
Problem
6-9
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Mt.
Orab Manufacturing Company
Cost
of Production Summary -- Machining Department
For
the Month Ended July 31, 20--
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Cost of
work in process, beginning of month
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Materials
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$
40,000
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Labor
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24,000
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Factory
overhead
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8,000
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$
72,000
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Cost of
production for month:
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Materials
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$
280,000
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