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ACC 1820 Project 3 Name Luke _Marougi Overview: The connect question addresses the calculations to determine the amount of costs to be transferred from the first of two production departments into the second department. The first production department includes only two cost categories. Costs for the second of two production departments are calculated based on relationships to the first department costs. Once the cost inputs for the second production department are determined, the calculation of costs to be transferred to finished goods inventory. The project summarizes the accounting for these transactions with Journal entries and T account postings. Accounting is included for the sale of this inventory and analyzed using various financial statement analysis ratios. The potential impact to the financial statements is explored regarding utilization of incorrect percentage of completion estimates in the calculation. Use the provided information and your work from Questions 21 and 22 from HW3.1 for Tamar Co. to complete the requirements for the project. Remember that Tamar Co. manufactures a product in two departments, Forming and Assembly. The company uses TWO Work-in-Process inventory accounts to track costs for each department. Once the product is completed in the Forming department, costs are transferred out of WIP-Forming and into WIP-Assembly. Use these Inventory T-accounts for Tamar Co. for May as directed in the requirements below. Note - These T accounts will not be complete until you reach requirement 5c of the project. WIP-Forming WIP-Assembly Bal.5/1 $329,140 Bal. 5/1 $762,400 DM added Transferred- $416,600 $2,268,000 $2,268,000 CC added Units $1,823,760 transferred out Bal 5/31 $301,500 5/31 $3,030,400 Raw Material Inventory Finished Goods Inventory Bal 5/1 420,000 $416,000 Bal 5/1 -0- DM $200,000 Packaging $8,680 Other Dm Purchase(Squeeze) $554,680 Bal 5/31 350,000 Bal 5/31 -0-1) Information for Second Department: The analysis you completed on connect for Tamar Co. relates to their FIRST department- Forming. We will use information from this department to calculate values for you to use in the SECOND department - Assembly later in the project. a) Units: Include the number of units in beginning and ending inventory for the Forming department in the table below - Forming column. (These can be found in the paragraph of given information of Question 21 on HW3.1) . Multiply the units by the "factors" provided in the table to calculate the number of units for Assembly's beginning and ending inventory. Units in WIP-Assembly Forming (connect) Factor (multiply) Assembly Beginning # of units 4,900 1.20 5,880 Ending # of units 3,350 0.80 2,680 b) Beginning Inventory Costs for Assembly: The assembly department will have 4 categories of costs for its process costing calculations; Forming Costs (transferred in from first department), Packaging costs (one category of direct material, Other direct material (a 2"d category of direct material) and Conversion costs (category combining direct labor and overhead). For the cost in the Assembly department's beginning inventory, use the BEGINNING costs for direct material and conversion from the Forming department (connect) and the factors provided below to calculate the "other direct material" and conversion costs in beginning inventory for Assembly department. Add all cost categories together for the "Total Costs". These amounts should be the beginning balance in the T accounts at the top of the project. Costs in Beginning WIP-Assembly Forming Cost Forming Costs Factor Assembly Cost Assembly Category connect (multiply) Category N/A N/A given value Forming $400,000 N/A N/A given value Packaging 200,000 Direct Material Costs $21,700 0.40 Other DM $8,680 Conversion Costs $307,440 0.50 Conversion $153,720 Total Costs $329,140 $762,400Required information [The following information applies to the questions displayed below] Tamar Co. manufactures a single product in two departments. All direct materials are added at the beginning of the Forming process. Conversion costs are added evenly throughout the process. During May, the Forming department started 19,450 units and transferred 21,000 units of product to the Assembly department. Its 4,900 units of beginning work in process consisted of $21,700 of direct materials and $307,440 of conversion costs. It has 3,350 units (100% complete with respect to direct materials and 80% complete with respect to conversion) in process at month-end. During the month, $416,600 of direct materials costs and $1,823,760 of conversion costs were charged to the Forming department. c) Costs Added (increases) to Assembly department: The journal entry made in Q21 to transfer costs OUT of the first department - Forming and into the Assembly department are considered "Forming" category costs for purposes of process costing calculations for the second department- ASSEMBLY. Include the amount from your Q21 journal entry in the Assembly Column for the "Forming Costs" row in the table below. Use the direct material costs ADDED/Incurred to the first department to calculate BOTH the Packaging costs and Other DM costs added/incurred in the second department-Assembly (use the respective "factors". Costs Added/Incurred in WIP-Assembly Forming Cost Forming Costs Factor Assembly Cost Assembly Category (connect (multiply) Category "transferred OUT" N/A Q21 JE Forming Direct Material Costs 1.20 Packaging Direct Material Costs 0.60 Other DM Conversion Costs 1.50 Conversion Total Costs Added/Incurred Note: This is your Check Point. You can text or email the tables above to Teri to insure you are headed in the correct direction. Your T accounts at the beginning of the Project will not be completed yet and therefore will not be verified with work in 1. 2) Accounting for added costs (journal entries and T accounts): Using the information on connect and above complete the following: a) Include May's beginning account balance for WIP-Forming and WIP-Assembly (totals from table in 1b) in the T accounts at the top of the project. b) Raw material requests are made for direct material to the Forming Department, "other direct material" and "Packaging" for the Assembly Department. Write the journal entry to record the raw material requested and charged (added/incurred) to BOTH the departments during May. Note - This can be written as one compound journal entry or as three separate journal entries (oe for each cost category).c) Assume the conversion costs (use amounts from Ic) consists of 45% direct labor and the remainder is factory overhead. There is no indirect labor for Tamar Co. Write the journal entry to record the wages charged (added/incurred) to BOTH departments in May. d) Write the journal entry to record the overhead applied to BOTH departments for May. (55% of conversion costs). e) Post ALL the journal entries from above to the T-accounts at the top of the project. f) Post the journal entry to record the costs for the items completed and transferred out of Forming Department and moved/added to Assembly Department. This JE should be from Question 22 of HW3.1. on CONNECT. g) Determine the ending balance for WIP-Forming. The ending balance should equal the dollar value in the row "total cost of ending work in process" as calculated in Question 21. Check that it does. h) Notice that the Raw Material Inventory account has a beginning and ending balance provided; $420,000 and $350,000, respectively. Calculate the amount of raw material that would have been purchased to increase the account. Write the journal entry assuming these purchases were made on account.3) Percentage complete for 2" Department-Assembly: Since the cost category Forming represents the costs from the 1" department - Forming, all units in beginning, ending, transferred in, and transferred out are 100% complete with respect to Forming costs. Units do not go to Assembly department until they are completed in the Forming department. Direct material costs (Other DM category) are incurred evenly over the production process until each unit is 80% through the Assembly department. At 80%, all the packaging is brought to the production process. Because of its significance and the how it is introduced into production, Tamar Co. treats the Packaging as a separate cost category. The assembly department's beginning inventory units were 90% complete and included $200,000 of packaging costs. The ending inventory for the assembly department was considered 65% complete and therefor, does not include any packaging costs. Conversion costs are incurred evenly over the entire production process. This information has been summarized into the table below. Use these percentages in the process costing calculations for the Assembly department. Assembly - estimated completion percentages Cost Category % complete on May 1 To complete on May 31 Forming 100% 100% Packaging 100% 0% Other Direct Material 100% 80% Conversion 90% 55% Note: For the calculation for the 2" department, Assembly, the tables are similar to the tables used in connect for questions 20 and 21. However, they have been broken them up to fit on the pages of the project here. You may want to use the tables from connect as a reference. a) Total Costs to account for: Assembly - Total Costs to account for: Beginning Work-in-Process ($ value from 1b) Costs incurred (Total costs from Ic) Total Costs to account for b) Unit Reconciliation: Accounting for Physical Units: Complete the unit reconciliation for the assembly department using the information from la. Note -The number of units transferred OUT of Forming (connect) and INTO Assembly can be obtained from your work in connect. Assembly - Unit Reconciliation # of units in Beginning Work-in-Process (from la) # of Units transferred from Forming Department (from connect) Total units to account for # of Units completed and transferred to finished Goods Inventory (**) # of Units in ending Work-in-Process Total units accounted for (**) Calculate as Total units - units in ending inventory. Remember Total units "to account for" will equal total "accounted for"