Can someone please help me with the solution to this? It's the mini practice set two, Jasper Chemical Corporation

Process Cost Accounting

In this practice set you will apply the techniques and principles of process cost accounting to record and summarize the flow of costs connected with the Jasper Chemical Corporation for the month of January. In completing the project, you will make postings to the general ledger accounts to record materials used, labor costs incurred, and manufacturing overhead costs. You will also compute equivalent production and complete the cost of production reports for pro- ducing departments. Then you will make entries to record the transfers of costs between de- partments, the recovery of a by-product, and the transfers of finished products from the final work in process inventory accounts to finished goods. However, in the interest of time you will not be required to make many of the routine entries to record costs, which you have learned to do in prior chapters. The practice set is designed to reinforce your knowledge of the essential elements of process cost accounting without the time-consuming work of detailed bookkeep- ing that would be required to record and post entries for many individual transactions.

JASPER CHEMICAL CORPORATION

Jasper Chemical Corporation manufactures three main products. The continuous produc- tion starts in the Combining Department where chemicals are mixed and processed. Some of the mixture is transferred to the Fractionating Department and the remainder to the Elec- trocharging Department.

In the Fractionating Department, materials are added and the mixture is further processed. Two finished products, Capisol and Cinnadine, are obtained and, on completion, are transferred to a refrigerated storeroom. A by-product material is also removed. It is col- lected and stored in bins. Periodically this material is sent to a subcontractor who processes it and returns it to Jasper for sale.

The chemicals transferred from the Combining Department to the Electrocharging De- partment also receive additional materials and further processing. In the process, an in- crease in units occurs. The finished product, Anitone, is transferred to a heated storeroom when it is completed.

The manufacturing flow is summarized by the diagram on page 453.

JASPER'S COST ACCOUNTING SYSTEM

The firm's process cost accounting system includes the usual journals and ledgers. All forms required to complete this practice set can be found in the Study Guide and Working Papers. If you are not using the Study Guide and Working Papers, you will have to record all such data on blank forms.

Journals

Special journals have been omitted from this problem for the sake of simplicity. Cost data is supplied for each department as required.

General Ledger

Jasper's chart of accounts includes the following accounts related to the flow of manufac- turing costs. The January 1 balance for each account is given.

121 Raw Materials

123 Work in Process-Combining Department 124 Work in Process-Fractionating Department 125 Work in Process-Electrocharging Department 126 Finished Goods

127 Inventory of By-Product

500 Factory Payroll Clearing

501 Manufacturing Overhead Control

$348,000 Dr. 6,900 Dr. 39,980 Dr. 61,nODr. 121,310 Dr. 400 Dr. -0- 3,700 Dr.

General ledger account forms are provided in the Study Guide and Working Papers. The January 1 balances have been entered.

Subsidiary Ledgers

Three subsidiary cost ledgers are used in normal operations:

Materials Ledger

Departmental Overhead Analysis Sheets Finished Goods Ledger

The first two ledgers are not provided in order to save time and they are not required for the solution to this practice set. The finished goods ledger provided in the Study Guide and Working Papers contains separate accounts for Capisol, Cinnadine, and Anitone. The Janu- ary I balances, shown below, have been entered.

Balance

Product

Units

Price

Amount

Capisol

3,100

$14.50

$44,950

Cinnadine

3,800

9.20

34,960

Anitone

2,300

18.00

41,400

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454 Part Two Process Cost Accounting

COST DATA

The cost data accumulated for each department are given in summary form.

Combining Department

Beginning and current month's costs for the Combining Department are as follows:

Beginning Work in Process Materials

Labor

Overhead

Balance of Accounts, Jan. 1

Current Month

Materials

Labor

Overhead

Total Current Month's Costs

$2,400 3,000 1,500 $6,900

$ 62,400 311,000 155,500 $528,900

Fractionating Department

The beginning inventory of the Fractionating Department includes costs from the prior de- partment, as shown.

Beginning Work in Process Costs from Prior Department Costs in Current Department Materials

Labor

Overhead

Balance of Accounts, Jan. 1

Current Month Materials Labor Overhead

Total Current Month's Costs

$23,600

780 6,600 9,000 $39,980

$ 11,570 97,900 133,500 $242,970

Electrocharging Department

The Electrocharging Department's cost data also include the prior cost category.

Beginning Work in Process Costs from Prior Department Costs in Current Department Materials

Labor

Overhead

Balance of Accounts, Jan. 1

Current Month Materials Labor Overhead

Total Current Month's Costs

$30,920

5,200 10,150 15,500 $61,770

$ 42,000 157,450 234,500 $433,950

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PRODUCTION DATA

Data regarding the departmental operations during January are reported by the department managers. The monthly departmental production reports are shown below.

COMBINING DEPARTMENT Monthly Production Report January 2007

Work in Process-Beginning

(All materials have been added; 25% of labor and overhead have been added.) Started in Production-Current Month Completed and Transferred Out

To Fractionating

To Electrocharging Work in Process-Ending

(All materials have been added; 50% of labor and overhead have been added.) Lost in Production

FRACTIONATING DEPARTMENT Monthly Production Report January 2007

Work in Process-Beginning

(All materials have been added; 75% of labor and overhead have been added.)

Transferred In From Combining Department Finished Goods Transferred Out

Capisol

Cinnadine

Work in Process-Ending

(50% of materials, labor, and overhead have been added.)

By-product

Lost in Production

3,000 units

80,000 units

48,000 units 28,000 units 5,000 units

2,000 units

4,000 units

48,000 units

26,000 units 19,000 units 5,000 units

1,000 units 1,000 units

ELECTROCHARGING DEPARTMENT Monthly Production Report January 2007

Work in Process-Beginning

(All materials have been added; 50% of labor and overhead have been added.)

Transferred In From Combining Department

Increase in Number of Units Due to Added Materials Main Product Completed and Transferred Out

Work in Process-Ending

(All materials have been added; 33~% of labor and overhead have been added.)

5,000 units

28,000 units 7,000 units 34,000 units 6,000 units

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COSTING PROCEDURES TO BE COMPLETED

In this practice set you will complete the following typical steps in the firm's cost account- ing cycle. These steps represent the most important aspects of process cost accounting.

1. Charge costs of procurement to Factory Payroll Clearing and Manufacturing Overhead Control (no materials were purchased).

2. Charge the costs of materials used, direct labor, and manufacturing overhead to the pro- ducing departments.

3. Compute the equivalent production for each department.

4. Prepare a cost of production report for each department (carry the unit costs to four deci-

mal places and round to three).

10.Transfer the costs from one process to another.

11.Transfer the value of any finished products to the Finished Goods account.

12.Transfer the value of any by-product to the Inventory of By-Product account. As you proceed, observe the specific instructions given.

13.Make a schedule of finished goods to reconcile the finished goods subledger with the general ledger.

Charging Costs

Procurement and production will be recorded by a general journal voucher. The amounts are included in the cost data for each department. No additional materials were purchased. As- sume there are no accrued wages at the end of January. Credit Cash for gross wages incurred for the entry. (Do NOT calculate payroll taxes, the credit is not posted). Assume overhead in- curred is $520,000. Credit "Various Accounts" for the entry; the credit is not posted.

1. Record the entries on the general journal vouchers. Use voucher numbers following a pattern of 1-1, 1-2, etc.

2. Post each entry to the general ledger accounts provided. (No Cash or "Various Ac- counts" accounts are in the ledger; you do not have to post these parts of your entries.) The January 1 balances are entered on the working papers. If you are not using the work- ing papers, be sure that you have entered the beginning balances given on pages 453 and 454 before posting January transactions.

Departmental Procedures

Perform the departmental costing procedures as outlined below.

Combining Department

Complete the following steps to summarize and record the cost flow of this first department.

1. Compute the equivalent production using the average cost method for handling inventories.

2. Prepare a cost of production report. Do not show an adjustment for lost units.

3. Prepare and post a general journal voucher to transfer costs out of the Combining Department to the Fractionating Department and to the Electrocharging Department. Allocate the costs using physical units.

Fractionating Department

Complete the costing procedures outlined, giving careful attention to special directions.

1. Compute the equivalent production data using the average cost method.

2. Prepare a cost of production report. Show an adjustment for lost units on the report. Use the reversal cost method for assigning common costs to the by-product. This by-product

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material is processed by the subcontractor for $.47 per pound. Jasper sells the by-product for $7.25 per pound after it has been treated by the subcontractor. The company's nor- mal gross margin on sales is 58 percent of the sales price. Show in a note to the cost of production report your calculation of the amount to be assigned to the by-product. Be- cause the total amount is small, the portion of the common costs assigned to the by- product is shown as a reduction in the costs of the units transferred out in the current month. (Remove this amount from the total and then allocate the cost to the joint prod- ucts.) Allocate remaining joint production costs between the two finished main products on the basis of their relative sales values. Capisol sells for $39 per unit and Cinnadine sells for $25.10 per unit. Show in a footnote to the report how you computed the joint cost allocation.

3. Prepare a general journal voucher to transfer costs out of the Work in Process- Fractionating Department account and into the Finished Goods and By-Product ac- counts. Then post this entry to the general ledger accounts and to the two finished goods subsidiary ledger accounts affected.

Electrocharging Department

Complete the required cost procedures as indicated.

I. Compute the equivalent units of production. Since the ending inventories are sometimes quite high, the company uses the first in, first out (FIFO) method of costing production in the department.

2. Prepare a cost of production report. Show an adjustment for the increase in units under Costs in Prior Department on the report, assuming that all materials are added in this de- partment at the beginning of the departmental processing.

3. Prepare the general journal voucher to record the completion of the product. Post the en- try to the appropriate general ledger and subsidiary ledger accounts.