QUESTION 2 60 marks Part A Cultiva Ltd. provides the costs for its single produc
ID: 2534891 • Letter: Q
Question
QUESTION 2 60 marks Part A Cultiva Ltd. provides the costs for its single product using process costing. Direct material is added at the beginning of the production process, and conversion activity occurs uniformly throughout the process Percent Complete Physical units 30,000 97,500 97,500 Materials Conversion 80% 40% Work in process, August 1 Units started during August Units completed and transferred out during August in process, August 31 30,000 50% 30% Total $339,500 $430,000 $769,500 Conversion $220,000 $119,500 $230,000 $200,000 $450,000 $319,500 Direct Materials Work in process, August 1 Costs incurred during August Total costs to account for Required Using weighted-average process costing in completing the following requirements (a) Determine the equivalent units for August. (b) Compute the costs per equivalent unit. (c) Compute the cost of goods completed and transferred out during August (d) Compute the cost remaining in the work in process inventory on August 31, and total 6 marks 6 marks 6 marks 10 marks cost to be accounted for (e) Prepare a journal entry to record the transfer of the cost of goods completed and transferred out. 2 marks Part B Albatross Workwear Clothing Ltd produces and distributes Workwear in Australia with a selling price of $25 The company is now preparing its budget for July to August 2017. In making the clothes (Finished Goods), it needs 2 metres of direct materials. In keeping production and sales moving smoothly, the company has the lowing requirements I. The finished goods inventory on hand at the end of each month must be equal to 5,000 units of clothes plus 20% of the next month's sales. The finished goods inventory on 30 June 2017 is budgeted to be 12,000 units The direct materials inventory on hand at the end of each month must be equal to 40% of the following month's production needs for direct materials. The direct materials inventory on 30 June 2017 is budgeted to be 54,000 metres. Budgeted purchase price of Direct Materials is $8 per metre The company maintains no work in process inventories ll. III. The company's projected sales for the last six months of the year follows Month Units August September Octobe November December 45,000 50,000 50,000 60,000 65,000 60,000 Required: Prepare the following budgets for the period from July to August 2017 (show your working) (a) (b) (c) (d) Sales budgets in units and dollars Production budgets in units Direct material usage budgets in metres Direct material purchase budgets in dollars and metres 6 marks 6 marks 6 marks 12 marksExplanation / Answer
UNITS TO ACCOUNT FOR: Beginning Work in Process units 30,000 Add: Units Started in Process 97,500 Total Units to account for: 127,500 UNITS TO BE ACCOUNTED FOR: Units started and completed 97,500 Ending Work in Process 30,000 Total Units to be accounted for: 127,500 Equivalent Units: Material Cost Conversion % Completion Units % Completion Units Units started and completed 100% 97,500 100% 97,500 Ending Work in Process 50% 15,000 30% 9,000 Total Equivalent units 112,500 106,500 TOTAL COST TO ACCOUNT FOR: Material Conversion Beginning work in Process 220,000 119,500 Cost Added during May 230,000 200,000 Total Cost to account for: 450,000 319,500 Total Cost to account for: 769,500 COST PER EQUIVALENT UNIT: Material Conversion Total cost added during the year 450,000 319,500 Equivalent Units 112,500 106,500 Cost per Equivalent unit 4 3 Units started and Transferred out (97500 units) Equivalent unit Cost per EU Total Cost Material 97,500 4 390000 Conversion Cost 97,500 3 292500 Total Cost of Units completed and transferred out: 682500 Ending Work in process (30,000 units) Equivalent unit Cost per EU Total Cost Material 15,000 4 60000 Conversison Cost 9,000 3 27000 Total cost of Ending Work in process: 87,000 Req a; Material Conversion Equivalent units 112500 106500 Req b: Material Conversion Cost perr eq. units 4 3 Rreq c: Cost of Goods completed and transferred out: $ 682,500 Req d: Cost of Ending Work in process: $ 87000 Req e: Journal entry: Finished Goods inventory Dr. 682500 Work in process inventory 682500