Pizang Corporation uses process costing. A number of transactions that occurred
ID: 2425600 • Letter: P
Question
Pizang Corporation uses process costing. A number of transactions that occurred in June are listed below. (1) Raw materials that cost $41,700 are withdrawn from the storeroom for use in the Mixing Department. All of these raw materials are classified as direct materials. (2) Direct labor costs of $47,700 are incurred, but not yet paid, in the Mixing Department. (3) Manufacturing overhead/Conversion costs of $56,900 is applied in the Mixing Department using the department's predetermined overhead rate. (4) Units with a carrying cost of $128,300 finish processing in the Mixing Department and are transferred to the Drying Department for further processing. (5) Units with a carrying cost of $133,800 finish processing in the Drying Department, the final step in the production process, and are transferred to the finished goods warehouse. (6) Finished goods with a carrying cost of $129,200 are sold. Required: Prepare journal entries for each of the transactions listed above assuming the company uses a manufacturing overhead account.
1. Work in Processing- Mixing $41,700
Raw Material Inventory $41,700
2. Work in Processing- Mixing $47,700
Direct Labor $47,700
3. Work in Processing- Mixing $56,900
Manufacturing Overheads $56,900
4. Work in Processing- Drying $128,300
Work in Process- Mixing $128,300
5. Finished Goods $133,800
Work in Process- Drying $133,800
6. Costs of Goods Sold $129,200
Finished Goods $129,200
**Show how the above entries would differ if Pizang uses a conversion account. (Question I need answered)
Explanation / Answer
If company uses the conversion cost method then Ignore the WIP account and Uses the conversion cost account with combination of Direct labour and Manufacturing overheads cost. Jounal entries under conversion cost method 1. Raw Material Inventory - Mixing $41,700 Accounts Payable $41,700 2. Conversion Cost- Mixing $1,04,600 Direct Labor and Manfacturing OH $1,04,600 3. Conversion Cost- Drying $1,28,300 Raw material Inventory - Mixing $36,570 Conversion Cost- Mixing $91,730 (Being Proportinate cost transfer to drying depatment) 4. Finished Goods $129200 Conversion Cost- Drying $1,29,200 5. Costs of Goods Sold $129,200 Finished Goods $129,200