The costs per equivalent unit of direct materials and conversion in the Rolling Department of Keystone Steel Company are $60 and $10, respectively. The equivalent units to be assigned costs are as follows: Equivalent Units Direct Materials | ConversionInventory in process, beginning of period 0 | 320Started and completed during the period 7,500 | 7,500Transferred out of Rolling (completed) 7,500 | 7,820Inventory in process, end of period 1,000 | 300Total units to be assigned costs 8,500 | 8,120The beginning work in process inventory had a cost of $25,000. Determine the cost of completed and transferred-out production and the ending work in process inventory.Answer:
Direct Materials Conversion Total Costs Costs Costs Inventoryin process, balance………………………… Inventoryin process, beginning of period…………… 0 + 320 × $10 3,200 Cost of completed beginning work in process……… $ 28,200 Started and completed during the period…………… 7,500 × $60 + 7,500 × $10 525,000 Transferred out of Rolling (completed)……………… $553,200 Inventory in process, end of period…………………… 1,000 × $60 + 300 × $10 63,000 Total costs assigned by the Rolling Dept. …………… $616,200 Completed and transferred-out production………… $553,200 Inventory in process, ending…………………………… $63,000
The cost of direct materials transferred into the Filling Department of Savannah Lotion Company is $13,300. The conversion cost for the period in the Filling Department is $3,100. The total equivalent units for direct materials and conversion are 38,000 ounces and 38,750 ounces, respectively. Determine the direct materials and conversion costs per equivalent unit.Answer:
Equivalent units of direct materials: Equivalent units of conversion: $13,300 38,000 $3,100 38,750 = $0.35 per ounce = $0.08 per ounce
LifeTyme Publishers Inc. budgeted production of 191,900 diaries in 2014. Paper is required to produce a diary. Assume seven square yards of paper are required for each diary. The estimated January 1, 2014, paper inventory is 29,100 square yards. The desired December 31, 2014, paper inventory is 32,900 square yards. If paper costs $0.80 per square yard, determine the direct materials purchases budget for 2014.
Answer:
Square yards required for production:
Diaries (191,900 × 7 sq. yd.)………………………………………………… 1,343,300
Plus desired ending inventory, December 31, 2014………………………… 32,900
Total………………………………………………………………………………… 1,376,200
Less estimated beginning inventory, January 1, 2014……………………… 29,100
Total square yards to be purchased…………………………………………… 1,347,100
Unit price (per sq. yd.)…………………………………………………………… $0.80
Total direct materials to be purchased……………………………………… $1,077,680
Wood Designs Company manufactures unfinished oak furniture. Wood Designs uses a standard cost system. The direct labor, direct materials, and factory overhead standards for an unfinished dining room table are as follows:Direct labor: standard rate $18.00 per hr. standard time per unit 2.0 hrs.Direct materials (oak): standard price $15.00 per bd. ft. standard quantity 20.0 bd. ft.Variable factory overhead: standard rate $2.75 per direct labor hr.Fixed factory overhead: standard rate $1.25 per direct labor hr.a. Determine the standard cost per dining room table.b. Why would Wood Designs Company use a standard cost system?Answer:
a. Direct labor………………………………………… $18.00 × 2.0 hrs. $ 36.00 Direct materials…………………………………… $15.00 × 20 bd. ft. 300.00 Variable factory overhead……………………… $2.75 × 2.0 hrs. 5.50 Fixed factory overhead…………………………… $1.25 × 2.0 hrs. 2.50 Total cost per unit……………………………… $344.00 b. A standard cost system provides Wood Designs’ management a cost control tool using the principle of management by exception. Using this principle, costs that deviate significantly from standards can be investigated and corrected. The standard cost system also can be used to motivate employees to work efficiently with their time, use of materials, and other factory overhead resources.
