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Part-l: Workout Questions 1. The Swiss Clock Shop manufactures clocks on a highly automated assembly line It's costing system utzes two cost categories, direct materials and conversion COsts. Each product must pass through the Assembly Deparirmert and the Testing Department. Direct materials are added at the oOSS are allocated evenly throughout production Swiss Clock Shop uses weighted averaye beginníng of the production process. Corversion Data for the Assembly Department for June 2015 are: Work in process, beginning inventory Units started during June (Direct materials; 100% complete, Conversion costs 50% complete) Units completed and transferred Work in process, ending inventory: 250 units 700 units Direct materials costs added during June Conversion costs added during June 800 units (Direct materials, 100% complete; Conversion costs, 60% cormplete) Costs for June 2015: 150 units Work in process, beginning inventory: Direct materials Conversion costs $180,000 $270,000 $470,000 $400,000 Instruction: prepare the cost of production report involving the five steps (12.5 pts.)

1 answer

To prepare a cost of production report for the Swiss Clock Shop's Assembly Department, we will follow these five steps:

Step 1: Determine Units to Account For

Step 1 involves calculating the total number of units to account for during June.

  • Units in beginning Work in Process (WIP): 250 units
  • Units started during June: 700 units

\[ \text{Total Units to Account For} = \text{Beginning WIP} + \text{Units Started} \] \[ \text{Total Units to Account For} = 250 + 700 = 950 \text{ units} \]

Step 2: Determine Units Accounted For

Step 2 involves calculating the units accounted for, which include units completed and transferred out, as well as units still in ending WIP.

  • Units completed and transferred out: 800 units
  • Units in ending WIP: 250 units (800 units completed + 250 units ending WIP = total units accounted for)

So, \[ \text{Total Units Accounted For} = \text{Units completed} + \text{Ending WIP} \] \[ \text{Total Units Accounted For} = 800 + 250 = 1050 \text{ units} \]

Step 3: Compute Equivalent Units of Production (EUP)

Step 3 involves calculating the equivalent units for both direct materials and conversion costs.

  1. For Direct Materials:
    • Completed units: 800 units (100% complete)
    • Ending WIP: 250 units (100% complete)

\[ \text{EUP (Direct Materials)} = \text{Completed Units} + \text{Ending WIP} \] \[ \text{EUP (Direct Materials)} = 800 + 250 = 1050 \text{ units} \]

  1. For Conversion Costs:
    • Completed units: 800 units (100% complete)
    • Ending WIP: 250 units at 60% complete

\[ \text{EUP (Conversion Costs)} = \text{Completed Units} + \left( \text{Ending WIP} \times \text{Completion %} \right) \] \[ \text{EUP (Conversion Costs)} = 800 + (250 \times 0.6) = 800 + 150 = 950 \text{ units} \]

Step 4: Calculate Total Costs

Step 4 involves calculating the total costs for direct materials and conversion costs for the period.

  • Direct Materials:

    • Beginning Inventory: $180,000
    • Costs added during June: $470,000 \[ \text{Total Direct Materials Cost} = \text{Beginning Inventory} + \text{Costs Added} \] \[ \text{Total Direct Materials Cost} = 180,000 + 470,000 = 650,000 \]

  • Conversion Costs:

    • Beginning Inventory: $270,000
    • Costs added during June: $400,000 \[ \text{Total Conversion Costs} = \text{Beginning Inventory} + \text{Costs Added} \] \[ \text{Total Conversion Costs} = 270,000 + 400,000 = 670,000 \]

Step 5: Compute Unit Costs

Step 5 involves calculating the costs per equivalent unit for both direct materials and conversion costs.

  1. Direct Materials Cost per Equivalent Unit: \[ \text{Direct Materials Cost per EUP} = \frac{\text{Total Direct Materials Cost}}{\text{EUP (Direct Materials)}} \] \[ \text{Direct Materials Cost per EUP} = \frac{650,000}{1050} \approx 619.05 \]

  2. Conversion Costs per Equivalent Unit: \[ \text{Conversion Costs per EUP} = \frac{\text{Total Conversion Costs}}{\text{EUP (Conversion Costs)}} \] \[ \text{Conversion Costs per EUP} = \frac{670,000}{950} \approx 705.26 \]

Step 6: Calculate Total Costs and Assign Costs to Completed and WIP Units

Next, we apply the unit costs to the completed units and ending WIP.

  1. Total Cost of Completed Units: \[ \text{Cost of Completed Units} = (\text{Completed Units} \times \text{Direct Materials Cost per EUP}) + (\text{Completed Units} \times \text{Conversion Costs per EUP}) \] \[ \text{Cost of Completed Units} = (800 \times 619.05) + (800 \times 705.26) = 495,240 + 564,208 = 1,059,448 \]

  2. Total Cost of Ending WIP: \[ \text{Cost of Ending WIP} = (\text{Ending WIP Units} \times \text{Direct Materials Cost per EUP}) + (\text{Ending WIP Units} \times \text{Conversion Costs per EUP}) \]

  • Direct materials for ending WIP (100% complete): \[ \text{Cost of Direct Materials in Ending WIP} = 250 \times 619.05 = 154,762.5 \]
  • Conversion costs for ending WIP (60% complete): \[ \text{Cost of Conversion in Ending WIP} = 250 \times 0.6 \times 705.26 = 105,789 \]

So total cost of ending WIP: \[ \text{Cost of Ending WIP} = 154762.5 + 105789 = 260,551.5 \]

Summary

  • Cost of Completed Units: $1,059,448
  • Cost of Ending WIP: $260,551.5

This cost of production report provides a comprehensive breakdown of costs incurred during the period in the Assembly Department of the Swiss Clock Shop.