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Special Fabricator assembles its product in several departments. It has two departments that process all units cutting and finishing. During October the beginning work-in-process in

Special Fabricator assembles its product in several departments. It has two departments that process all units cutting and finishing.

During October the beginning work-in-process in the Cutting department was half completed as to conversion and completed as to direct materials. The beginning inventory in this department, included $12,000 for materials and $3,000 for conversion. Ending work-in-process inventory in the Cutting department was 40 percent complete. In the Cutting department, direct materials are added at the beginning of the process and conversion costs are incurred evenly during the process. Special Fabricator uses the weighted average method for inventory in the Cutting department. Inspection for spoilage takes place at the 45% completion point in the department. Total defective units this period were 750 with expected spoilage to be 2 percent of units inspected. All spoiled units are scrapped.

Beginning work-in-process in the Finishing department was 55 percent complete as to conversion. In the Finishing department, direct materials are added at the 50% completion point and at the end of the process with conversion costs being incurred evenly during the process. Beginning inventory included $16,000 for transferred in costs, $10,500 regarding direct material one and $20,000 of conversion costs. Ending inventory was 35 percent complete. Special Fabricator applies the FIFO method in the Finishing department. The first inspection point for spoilage is at the 25% completion point. All defective units at this point are scrapped. At the 65% completion point, there is a second inspection where rejected units are returned for rework to the 30% completion point. The third inspection point is at the 70% completion point. Units spoiled at this point can be sold for $0.20 each. At inspection point one, one percent of units inspected are expected to be defective. For the second inspection point, the rate is 1% of units surviving inspection. At the third inspection point the expected rate of spoilage is 2% of units inspected.

Additional data:

Cutting Finishing

Beginning work-in-process units 20,750 20,000

Units started this period 40,000

Units transferred this period 50,000 ?

Ending work in process units ? 20,000

Total actual spoiled units Inspection 1 700

Total actual reworked units Inspection 2 520

Total actual spoiled units Inspection 3 800

Material one cost added $48,000 $34,000

Material two cost added $15,000

Direct manufacturing labour cost $16,000 $40,000

Factory overhead cost $8,000 $24,000

  1. Prepare production cost reports for the Cutting and Finishing departments.
  2. Indicate the journal entries to be recorded at the end of October regarding the Finishing department.

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