Mini-case 3

Wizard's Skateboard shop sells premium skateboards for use in skate parks. The shop uses a process-costing system to compute the unit costs of the skateboards that it produces and sells for $450. Customers place orders online for skateboards where they can customize the decks and griptape with a choice of patterns and colours. The parts are purchased and assembled, customized with the customer's choice of grip tape for the deck, trucks and wheels, and packaged to be sent by courier directly to the customer. Wizard's Skateboard shop has three distinct departments: Assembly, Customization, and Packaging/Shipping.

The production process works as follows: all major parts have been assembled and the skateboard is tested before it is transferred from Assembly to Customization, the Customization department adds some materials to meet customer's preference, and finally, the Packaging/Shipping department places the skateboard in a cardboard box and makes arrangements for shipping to the customer. Overhead in each department is applied based on direct labour costs at a rate of 130% for assembly and 115% for customization.

During March, the following results are available for the first two departments:

Assembly

Customization

Beginning inventories:

Physical units

22 skateboards

15 skateboards

Costs:

Materials

$4,600

$4,900

Labour

$3,400

$4,250

Overhead

10,400

10,523

Transferred in

-

$1,000

Current production:

Transferred out

220 skateboards

240 skateboards

Ending inventory

14 skateboards

12 skateboards

Costs incurred in March:

Materials

$17,040

$1,300

Transferred in

-

?

Labour

$14,650

$1,180

Overhead

41,197

2,852

Percentage of completion:

Beginning inventory

65%

75%

Ending inventory

Material 50%

Material 100%

Conversion 50%

Conversion 25%

Required:

Following the five steps outlined in the chapter, create production report for the Assembly and Customization departments using the weighted average method.