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Assignment 3: Spoilage in Weighted Average and FIFO Cost Flow Method

This document contains 3 problems regarding spoilage in weighted average and FIFO cost flow methods. Problem 1 provides cost and unit data for Hanks Company that produces glass jars and asks to prepare cost of production reports and journal entries using weighted average and FIFO methods. Problem 2 provides similar data for Ortaleza Company that manufactures wine and asks to prepare reports and entries under different spoilage assumptions. Problem 3 provides multi-part data for El Mabalbon Company that manufactures smartphones and asks to prepare journal entries under various material addition point and cost flow method assumptions.

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Kelvin Culajará
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367 views3 pages

Assignment 3: Spoilage in Weighted Average and FIFO Cost Flow Method

This document contains 3 problems regarding spoilage in weighted average and FIFO cost flow methods. Problem 1 provides cost and unit data for Hanks Company that produces glass jars and asks to prepare cost of production reports and journal entries using weighted average and FIFO methods. Problem 2 provides similar data for Ortaleza Company that manufactures wine and asks to prepare reports and entries under different spoilage assumptions. Problem 3 provides multi-part data for El Mabalbon Company that manufactures smartphones and asks to prepare journal entries under various material addition point and cost flow method assumptions.

Uploaded by

Kelvin Culajará
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Ateneo de Zamboanga University

SCHOOL OF MANAGEMENT AND ACCOUNTANCY


Accounting 206: Cost Accounting and Cost Management, Part II

Assignment 3: Spoilage in Weighted Average and FIFO Cost Flow Method

KELVIN JALUAG CULAJARA, BSA, CPA

Problem 1: Hanks Company

Hanks produces glass jars in a single department; the jars are then sold to
candle manufacturers. All materials are added at the start of the process, and
conversion costs are applied uniformly throughout the production process.
Breakage commonly occurs at the end of the production process when a machine
pushes air into the jars to form their openings. Hanks expects a minimum of 5
percent of the units started into production to be “lost” during processing.
The company uses weighted average method of calculating equivalent units.

Jars      
Beginning WIP inventory (60%
complete) 12,000
Started during the month 90,000
Jars completed and transferred 79,200
Ending WIP inventory (75% complete) 15,000

Costs      
Beginning WIP inventory
Materials ₱ 16,230
3,45
Conversion 9 ₱ 19,689
Current period
Materials 101,745
19,68
Conversion 19,041 9
Total costs to be accounted for ₱ 39,378

Required:
1. Prepare a cost of production report and the necessary journal entries
assuming the company uses weighted average method.
2. Prepare a cost of production report and the necessary journal entries
assuming the company uses first-in, first-out method.
Problem 2

Ortaleza Company manufactures Strawberry Wine. All direct materials are added
at the beginning of the production process. Goods are inspected at the end of
the process. The following are additional cost and unit data:

Physical Direct
  Units Materials Conversion Costs
       

Work in process, beginning -    

Started during May 5,000   s


       

Transferred out 2,500    

Work in process, ending 2,000    


       
Cost of WIP beginning (in
PHP)   - -
Costs added during the
period (in PHP)   135,000 66,500

Conversion costs are 75% complete

 Prepare a cost of production report and the necessary journal entries


assuming the company uses weighted average method, under each of the
following assumptions:
o Normal spoilage is 20% of the “good units”.
o Normal spoilage is 10% of the “good units”.
Problem 3

El Mabalbon Company manufactures smartphones. Conversion costs are added


evenly during the production process, and so ending work in process units are
50% complete as to conversion costs. Some of the units are spoiled as they
undergo the process. Normal spoiled units are usually equivalent to 15% of the
“good units”. The following are the cost and unit data:

Physical Direct
  Units Materials Conversion Costs
       

Work in process, beginning 3,000    

Started during May 7,000    


       

Transferred out 7,500    

Work in proces, ending 500    


       
Cost of WIP beginning (in
PHP)   30,000 45,000
Costs added during the
period (in PHP)   77,500 85,700

Prepare the necessary journal entries under each of the following independent
assumptions:
 Weighted average method is being used
o Materials are added at the start of the process
o Inspection point is at 100% of the process
 Weighted average method is being used
o Materials are added at the end of the process
o Inspection point is at 40% of the process
 Weighted average method is being used
o Materials are added at 45% of the process
o Inspection point is at 40% of the process
 FIFO method is being used
o Materials are added at the start of the process
o Inspection point is at 100% of the process
 FIFO method is being used
o Materials are added at the end of the process
o Inspection point is at 40% of the process
 FIFO method is being used
o Materials are added at 45% of the process
o Inspection point is at 40% of the process

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