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Cost Accounting Methods Overview

Norman Corporation uses a process costing system to produce its only product. Units are started in the Forming Department and transferred to the Finishing Department to be completed. Spoilage is charged to Factory Overhead Control. In August, 9,000 units were started, 8,000 were transferred, and 1,500 units were in ending inventory. Total costs added were $144,150 which were accounted for through completed units, overhead control, and units in ending inventory.

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217 views3 pages

Cost Accounting Methods Overview

Norman Corporation uses a process costing system to produce its only product. Units are started in the Forming Department and transferred to the Finishing Department to be completed. Spoilage is charged to Factory Overhead Control. In August, 9,000 units were started, 8,000 were transferred, and 1,500 units were in ending inventory. Total costs added were $144,150 which were accounted for through completed units, overhead control, and units in ending inventory.

Uploaded by

hanna fhaye dente
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
  • Exhibit 3 Analysis
  • Problem 2 Analysis

Problem 1

Norman Corporation uses a process cost system with average cost to account for the production of its only product. The products are manufactured in two
departments. Units of products are startedin the Forming Department and then transferred to the Finishing Department, where they are completed. Units are
inspected at the end of the production process in the Forming Departmentand the cost of spoilage is charged to Factory Overhead Control. Data related to
August operations in the

Forming Department are:

Units in beginning inventory (stage of completion: 60%


1,000
materials, 35% labor and 25% overhead)
Units started in process 9,000

Units transferred to the finishing department 8,000

Units in ending inventory (stage of completion: 100%


1,500
materials, 75% labor, 50% overhead)

Beg. Inventory During the month


Costs charged to the department
Materials 2,520.00 72,480.00
Labor 1,540.00 21,560.00
Overhead 2,800.00 43,450.00

Norman Corporation
Cost of Production Report
For the Month ended, August

Materials Labor Overhead


Actual Work Done EP Work Done EP Work Done EP
Unit Process Beg. 1,000
Unit Started 9,000
10,000
Unit Completed and transferred 8,000 100% 8,000 100% 8,000 100% 8,000
Unit IP, end. 1,500 100% 1,500 75% 1,125 50% 750
Unit loss, end. 500 100% 500 100% 500 100% 500
10,000 10,000 9,625 9,250
Cost Charged to the department
Cost Added to the Department
IP, beg.
Materials 2,520
Labor 1,540
Overhead 2,800
Added during this month
Materials 72,480.00 7.5
Labor 21,360.00 2.4
Overhead 43,450.00 5
Total Cost Added 144,150.00 14.9
Total Cost to be accounted for 144,150.00 14.9

Cost Accounted as Follows:


Completed and Transferred 119,200
Factory Overhead Control 7,450
In process, End
Materials 11,250
Labor 2,700
Overhead 3,750 17,700
Total Cost as Accounted for 144,350

FIFO METHOD
Problem 2

Anchor Company manufactures three main products. A, B, and C from a joint process. Joint costs are allocated on the basis of market value at split off. for June
Additional information production follows:

A B C Total
Units Produced 50,000 40,000 10,000 100,000
Joint Costs 450,000.00
Sales Value at SO 420,000.00 279,000.00 60,000.00 759,000.00
Additional processing costs 88,000.00 30,000.00 12,000.00 130,000.00
Sales Value if processed

Requirement: Compute for the total costs of each product using:


1. Market Value Method (10 points)
2. Average Unit Cost Method (10 points)

1. Market Value Method

Product Units Produced SV and SO Share in Joint Cost Add'l Processing Cost Total Cost
A 50,000 420,000.00 249,011.86 88,000.00 337,011.86
B 40,000 279,000.00 165,415.02 30,000.00 195,415.02
C 10,000 60,000.00 35,573.12 12,000.00 47,573.12
100,000 759,000.00 450,000.00 130,000.00 580,000.00

2. Average Unit Cost Method

Product Units Produced Cost per Unit Share in Joint Cost Add'l Processing Cost Total Cost
A 50,000 4.5 225,000 88,000.00 313,000.00
B 40,000 4.5 180,000 30,000.00 210,000.00
C 10,000 4.5 45,000 12,000.00 57,000
100,000 130,000.00 580,000.00

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