CASE SCENARIO PART 1 O Council Tool, Inc., manufactures handles for axes. Each handle passes through three processes: Cutting, Sanding, and Finishing. In June, the Cutting Department of the Lake Waccamaw, North Carolina factory reported the following data: In Cutting, all direct materials are added at the beginning of the process. Beginning work in process consisted of the following: o 51,500 units, 15 percent complete with respect to direct labor and overhead. Costs in beginning inventory included direct materials, $1,345,000; direct labor, $285,650; and applied overhead, $202,515. Costs added to production during the month were direct materials, $2,781,100; direct labor, $4,215,910. Overhead was assigned using the following information: Activity Rate Actual Driver Usage Inspection $160 per inspection hour 3,500 inspection hours Maintenance $720 per maintenance hour 1,540 maintenance hours Receiving $250 per receiving order 1,750 receiving orders At the end of the month, 119,850 units were transferred out to Sanding, leaving 13,250 units in ending work in process, or 30 percent complete. Required Part 1 (first tab): 1. Prepare a physical flow schedule. 2. Calculate equivalent units of production for direct materials and conversion costs. 3. Compute unit cost under weighted average. 4. Calculate the cost of goods transferred to Sanding at the end of the month. Calculate the cost of ending inventory. 5. Prepare the journal entry that transfers the goods from Cutting to Sanding. CASE SCENARIO PART 2 Refer to the data in Part 1. Assume that the FIFO method is used. Required Part 2 (second tab): 1. Prepare a physical flow schedule. 2. Calculate equivalent units of production for direct materials and conversion costs. 3. Compute unit cost under the FIFO method. 4. Calculate the cost of goods transferred to Painting at the end of the month. Calculate the cost of ending inventory. 5. Prepare the journal entry that transfers the goods from Cutting to Sanding. Units 1. Physical Flow Schedule Units to account for: Units, beginning work in process Units started Units to account for Units accounted for. Units completed and transferred out Units, ending work in process Total units accounted for Enter the appropriate amounts in the shaded cells in columns E, G, I, K and M. Materials Conversion 2. Equivalent Units - Weighted Average Method Units completed and transferred out Percent Units, ending work in process: Materials Conversion Equivalent units of output Materials Conversion Total 3. Costs to Account For and Cost per Unit Costs in beginning work in process Costs added during the month Divided by: Equivalent units of output Cost per unit 4. Cost Accounted For Units Unit Cost Costs transferred out: X Costs in ending work in process: Material Conversion Total cost accounted for X Reconciliation: Costs to account for Beginning WIP Current Total Costs accounted for. Transferred out Ending WIP Total Select accounts from the drop-down lists and enter the appropriate amounts in column G and I. 5. Journal Entry To do To do To do To do Units 1. Physical Flow Schedule Units to account for: Units, beginning work in process Units started Units to account for Units accounted for. Units completed and transferred out Units, ending work in process Total units accounted for Enter the appropriate amounts in the shaded cells in columns E, G, I, K, and M. Materials Conversion 2. Equivalent Units - FIFO Method Units started and completed Percent x 0% x Units, beginning work in process: Materials Conversion Units, ending work in process: Materials Conversion Equivalent units of output X 3. Materials Conversion Total Costs to Account For and Cost per Unit Unit cost: Costs added Divided by: Equivalent units of output Cost per unit 4. Costs Accounted For: Costs transferred out: Beginning WIP To complete beginning WIP Started and completed Total Costs in ending work in process: Material Conversion Reconciliation: Costs to account for: Beginning WIP Current Tot Costs accounted for: Transferred out Ending WIP Total Select accounts from the drop-down lists and enter the appropriate amounts in column G and I. 5. Journal Entry To do To do To do To do
