Rich company produces a variety of stationery products. One product, sealing wax sticks, passes through two processes: blending and molding. The weighted average method is used to account for the cost of production. Two ingredients, paraffin and pigment are added at the beginning of the process and heated and mixed for several hours. After blending, the resulting product is sent to the Molding department, where it is poured into molds and cooled. The following information relates to the blending process for November: a) Work in process, November 1, had 20,000 pounds, 20% complete with respect to conversion costs. Costs associated with partially completed units with Paraffin $ 120,000 Pigment $ 100,000 Direct Labor $ 30,000 Overhead applied $ 10,000 b) Work in process, August 31, had 30,000 pounds, 70% complete with respect to conversion costs. c) Units completed and transferred out totaled 500,000 pounds. Costs added during the month were: Paraffin $ 3,060,000 Pigment $ 2,550,000 Direct Labor $ 3,877,500 Over applied $ 1,292,500 Required 1. Prepare for the following (a) unit completed (b) an equivalent unit schedule with cost categories for paraffin, pigment, and conversion costs. 2. Calculate the unit cost for each cost category. 3. Compute the cost of ending work in process and the cost of goods transferred out. 4. Prepare a cost reconciliation.
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Rich company produces a variety of stationery products. One product, sealing wax sticks,
passes through two processes: blending and molding. The weighted average method is used to
account for the cost of production. Two ingredients, paraffin and pigment are added at the
beginning of the process and heated and mixed for several hours. After blending, the resulting
product is sent to the Molding department, where it is poured into molds and cooled. The
following information relates to the blending process for November:
a) Work in process, November 1, had 20,000 pounds, 20% complete with respect to
conversion costs. Costs associated with partially completed units with
Paraffin $ 120,000
Pigment $ 100,000
Direct Labor $ 30,000
b) Work in process, August 31, had 30,000 pounds, 70% complete with respect to
conversion costs.
c) Units completed and transferred out totaled 500,000 pounds. Costs added during the
month were:
Paraffin $ 3,060,000
Pigment $ 2,550,000
Direct Labor $ 3,877,500
Over applied $ 1,292,500
Required
1. Prepare for the following (a) unit completed (b) an equivalent unit schedule with cost
categories for paraffin, pigment, and conversion costs.
2. Calculate the unit cost for each cost category.
3. Compute the cost of ending work in process and the cost of goods transferred out.
4. Prepare a cost reconciliation.
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