Managerial Accounting 10th Canadian Edition Solutions Test Bank Garrison

Managerial Accounting 10th Canadian Edition Solutions Test Bank Garrison SOLUTIONS MANUAL, answer key for Accounting for Managerial Accounting 10th Canadian Edition by Ray Garrison, G. Richard Chesley, Ray Carroll, Alan Webb, Theresa Libby. Download: https://testbankarea.com/download/managerial-accounting-10th-canadian-edition-solutions-manual-garrison/ TEST BANK for Accounting for Managerial Accounting 10e/10th 10 e/10th Canadian Edition by Ray Garrison, G. Richard Chesley, Ray Carroll, Alan Webb, Theresa Libby. Download: https://testbankarea.com/download/managerial-accounting-10th-canadian-edition-test-bank-garrison/

Chapter 6 Systems Design: Process Costing

Solution to Discussion Case Estimating percentage of completion of products requires a judgment call. As with all areas where judgment comes to play, play, managers will tend to be more or less conservative depending on several factors including the degree to which they inherently tend toward conservative estimates and forecasts. From the perspective of the organization, the objective is to provide as accurate an estimate of percentage of completion co mpletion as possible in order to better understand and control costs and to ensure the integrity of the costcos ting system. Even so, managers also have incentives to improve profit, both for the shareholder's sake as well as to meet performance evaluation and ” is bonus targets each year. But “ But “misestimating misestimating” is likely of only short term benefit since the Board will quite quickly fail to trust the manager's estie sti-

Solutions Manual, Chapter 6

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mated percentage of completion if they prove to be wrong over several periods. Once this happens, the company would be foolish to continue to provide incentives to base bonuses on divisional profit figures if these figures fi gures cannot be trusted. In the end, the benefit of subverting the integrity of the accounting system is likely much lower than the potential long-term reputational cost.











Solutions to Questions 6-1 A process costing system should be used in situations where a homogeneous products or services are produced on a continuous basis. 6-2 1. In job-order costing many different jobs are worked on during each period each with its own production requirements. In process costing, a single product is produced on a continuous basis and all units are identical. 2. The job cost sheet is the key document in job-order costing while the department department production report is the key document in process costing. 3. Unit costs are computed by job in job-order costing while unit costs are computed by department in process costing. Cost accumulation is simpler under pro6-3 cess costing because costs only need to be assigned to departments —not —not separate jobs. A company usually has a small number of processing departments, whereas a job-order costing system often must keep track of the costs of hundreds or even thousands of jobs. 6-4 In a process costing system, a Work in Process account is maintained for each processing department. 6-5 The journal entry would be: Work in Process,- Firing ...... XXXX Work in Process-, Mixing ... XXXX The costs that might be added to the Firing Department’s Work in Process account du ring the period are, (1) transferred-in costs from 6-6

the Mixing Department; (2) materials costs; (3) labour costs; and (4) overhead costs added in the Firing Department. 6-7 Under the weighted-average method, equivalent units of production consist of units transferred to the next department (or to fi-

6-8 Disagree. 6-8 Disagree. In fact, flexible flexi ble manufacturing systems may actually increase the the use of process costing over time. These systems can have a major impact on costing since they allow for an easy switch from producing one type of product to another. another. The systems’ flexibility means product switching results in little time lost and relatively low setup costs. costs. Therefore, companies are able to move between products with about the same speed as they would if they were working in a continuous processing environment. As the use of flexible manufacturing systems grows, so should the application of process costing techniques. 6-9 Advantages of the weighted average method include: computations are simpler; the managers does not need information at too fine a level of detail so the average is informative enough; there is little change in cost from period to period; ending inventory are typically low each period so the average ends up being quite accurate.











Exercise 6-1 (20 minutes) a. To record issuing raw materials materials for use in production: production: —Moulding Department ....... Work in Process —Moulding 28,000 Work in Process —Firing 5,000 —Firing Department............. Raw Materials .......................................

33,000

b. To record direct labour costs incurred: Work in Process —Moulding —Moulding Department ....... —Firing Department............. Work in Process —Firing Wages Payable .....................................

18,000 5,000 23,000

c. To record applying manufacturing overhead: —Moulding Department ....... Work in Process —Moulding Work in Process —Firing —Firing Department............. Manufacturing Overhead .......................

24,000 37,000 61,000

d. To record transfer of unfired, molded molded bricks from the Molding Department to the Firing Department: Work in Process —Firing 67,000 —Firing Department............. Work in Process —Moulding 67,000 —Moulding Department . e. To record transfer of finished bricks from the Firing Department Department to the finished goods warehouse: Finished Goods............................................ 108,000 Work in Process —Firing 108,000 —Firing Department ...... f. To record record Cost of Goods Sold: Cost of Goods Sold ...................................... Finished Goods .....................................

106,000 106,000











Exercise 6-2 (10 6-2 (10 minutes) Weighted-Average Method Quantity Schedule Units to be accounted for: Work in process, October 1 Units started into production Total units

25,000 195,000 220,000

Equivalent Units Materials Conversion Units transferred to the next departdepar tment ............................................. Ending work in process: Materials: 15,000 units × 70% complete ..................................... Conversion: 15,000 units × 50% complete ..................................... Equivalent units of production ...........

205,000

205,000 2 05,000

15,000

10,500

220,000

215,500

205,000

7,500 212,500











Exercise 6-3 (10 minutes) Weighted-Average Method Costs per Equivalent Unit:

Work in process, May 1 ... Cost added during May ... Total cost (a) ................. Equivalent units of production (b) ............. Cost per equivalent unit (a) ÷ (b) .....................

Total Cost Materials Labour Overhead $156,270 $ 14,550 $23,620 $118,100 174,330 88,350 14,330 71,650 $330,600 $102,900 $37,950 $189,750 ---------

1,200

1,100

1,100

$85.75

$34.50

$172.50

Total cost per equivalent Unit = $85.75 + $34.50 + $172.50 = $292.75













Exercise 6-4 (10 6-4 (10 minutes) Weighted-Average Method Materi- als Ending work in process inventory: Equivalent units of production ................ Cost per equivalent unit ......................... Cost of ending work in process inventory Units completed and transferred out: Units transferred to the next department Cost per equivalent unit ......................... Cost of units completed and transferred out ...................................................

Conver- sion

Total

300 $31.56 $9,468

100 $9.32 $932 $10,400

1,300 $31.56

1,300 $9.32

$41,028

$12,116 $53,144











Exercise 6-5 (10 6-5 (10 minutes) —Mixing ................................. Work in Process —Mixing Raw Materials Inventory ............................

330,000

Work in Process —Mixing —Mixing ................................. —Baking ................................. Work in Process —Baking Wages Payable ..........................................

260,000 120,000

Work in Process —Mixing —Mixing ................................. Work in Process —Baking —Baking ................................. Manufacturing Overhead ............................

190,000 90,000

—Baking ................................. Work in Process —Baking —Mixing ............................ Work in Process —Mixing

760,000

Finished Goods ............................................... —Baking............................ Work in Process —Baking

980,000

330,000

380,000

280,000 760,000 980,000











Exercise 6-6 (20 minutes) Weighted-Average Method 1. Equivalent Units (EU) Labour & Materials Overhead Litres transferred to the next department depa rtment during June* ............................................................... Work in process, June 30: Materials: 50,000 litres × 60% complete ............ Labour and overhead: 50,000 litres × 20% complete .............................................................. Equivalent units of production ..............................

790,000

790,000

30,000

820,000

10,000 800,000

– Ending * Beginning WIP 80,000 + Started 760,000 760,000 – Ending WIP 50,000 = 790,000 litres. 2. Cost per Equivalent Unit: Cost of beginning work in process ..... Costs added during June ................. Total cost (a) ................................... Equivalent units of production (b) ..... Cost per equivalent unit (a) ÷ (b) .....

Materials Labour Overhead $ 68,600 $ 30,000 30 ,000 $ 48,000 907,200 370,000 592,000 $975,800 $400,000 $640,000 820,000 800,000 800,000 $1.19 $.50 $.80











Exercise 6-7 (10 6-7 (10 minutes) Weighted-Average Method Equivalent Units (EU) Labour & Materials Overhead Litres transferred to the Heating Department during October* ..................................................... Work in process, October 31: Materials: 5,000 litres × 100% complete ............ Labour and overhead: 5,000 litres × 70% complete .............................................................. Equivalent units of production ..............................

45,000

45,000

5,000

50,000

3,500 48,500

– Ending * Beginning WIP 25,000 + Started 25,000 25,000 – Ending WIP 5,000 = 45,000 litres .











Exercise 6-8 (30 6-8 (30 minutes) Weighted-Average Method 1. Equivalent Units: Materials Conversion Units transferred to the next process .......... 320,000 320,000 Ending work in process: Materials: 60,000 units × 45% complete .. 27,000 Conversion: 60,000 units × 20% complete. 12,000 12,0 00 Equivalent units of production .................... 347,000 332,000 2. Costs per Equivalent Unit: Materials Conversion Cost of beginning work in process .............. $ 76,600 $ 34,900 Cost added during the period ..................... 410,000 234,500 Total cost (a) ............................................ $486,600 $269,400 Equivalent units of production (b) .............. 347,000 332,000 Cost per equivalent unit (a) ÷ (b)............... $1.40 $0.81* 3.

Materials Conversion Ending work in process inventory: Equivalent units of production (see above) ........................ 27,000 12,000 Cost per equivalent unit (see above) ............................... $1.40 $0.81 Cost of ending work in process inventory............................ $37,800 $9,720

Total

$47,520























Exercise 6-9 (20 6-9 (20 minutes) Cost Reconciliation Total Cost Cost accounted for as follow: Transferred to Packaging Dept: 45,000 rolls x $14.50 Work in process, January 31: Materials, $10.50 per EU Conversion , $4.00 per EU Total cost accounted for

Materials Materi als

$652,500

45,000

$42,000 $12,800 54,800 $707,300

4,000

Conversion Convers ion

45,000

3,200











Problem 6-10 (45 6-10 (45 minutes) Weighted-Average Method 1. Equivalent Units of Production Materials Conversion Transferred to next department ...................... 380,000 380,000 Ending work in process: Materials: 100,000 units × 60% complete ..... 60,000 Conversion: 100,000 units × 40% complete .. 40,000 Equivalent units of production......................... 440,000 420,000 2. Cost per Equivalent Unit Materials Conversion Cost of beginning work in process ................. $ 45,500 $ 25,000 Cost added during the period ....................... 425,500 145,000 Total cost (a) ............................................... $471,000 $170,000 Equivalent units of production (b) ................. 440,000 420,000 Cost per equivalent unit, (a) ÷ (b) ................ $1.07 $0.405*











Cost of units completed and transferred out ..................

$406,600

$153,900 $560,500











Problem 6-10 (continued) 6-10 (continued) 4. Cost Reconciliation Costs to be accounted for: Cost of beginning work in process inventory ($45,500 + $25,000) ................................. Costs added to production during the period ($425,500 + $145,000) .............................. Total cost to be accounted for ...................... Costs accounted for as follows: Transferred to next department: 380,000 units x $1.475 ..................................... Work in process June 30 Materials at $1.07 per EU ............................. Conversion at $0.405 per EU ........................ Total cost accounted for ............................... *off $100 due to rounding

$ 70,500 570,500 $641,000 $560,500 64,200 16,200 80,400 $640,900*













Problem 6-11 (45 6-11 (45 minutes) Weighted-Average Method 1. Equivalent Units of Production Materials Conversion Transferred to next department* ..................... 395,000 395,000 Ending work in process: Materials: 55,000 units × 65% complete ........ 35,750 Conversion: 55,000 units × 30% complete .....

16,500











Problem 6-11 (continued) 6-11 (continued) 3. Cost of Ending Work in in Process Inventory Inventory and Units Units Transferred Transferred Out Materials Conversion Conversio n Total Ending work in process inventory: Equivalent units of production (materials: 55,000 units × 65% complete; conversion: 55,000 16,500 units × 30% complete) ...... 35,750 Cost per equivalent unit ....... $1.31 $0.64 Cost of ending work in process











Problem 6-11 (continued) 6-11 (continued) 4. Cost Reconciliation Costs to be accounted for: Cost of beginning work in process inventory ($101,000 + $51,000) .................................... Costs added to production during the period ($462,000 + $213,000) .................................. Total Cost Costs accounted for as follows:

$152,000 675,000 $827,000











Problem 6-12 (30 minutes) Weighted-Average Method 1. Total units transferred to the next department .. Less units in the May 1 inventory ...................... Units started and completed in May ..................

28,000 8,000 20,000

2. The equivalent units were: Materials Conversion Transferred to next department .................. 28,000 28,000 Ending work in process: Materials: 6,000 units × 75% complete ..... 4,500











Problem 6-13 (45 minutes) Weighted-Average Method 1. Equivalent Units of Production Materials Conversion Transferred to next department* ..................... 270,000 270,000 Ending work in process: Materials: 45,000 kilograms × 100% complete 45,000 45,0 00 2 3 Conversion: 45,000 kilograms × / complete . 30,000 Equivalent units of production.......................... 315,000 300,000 *35,000 + 280,000 – 280,000 – 45,000 45,000 = 270,000.













Problem 6-13 (continued) 4. In computing unit costs, the the weighted-average method mixes costs of the prior period with current period costs. Thus, under the weighted-av-

Managerial Accounting 10th Canadian Edition Solutions Test Bank Garrison

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