Project Management Accounting

Question: DescriptionHobart Beverage Company uses the weighted-average method in its process costing system. Materials are included at the start of the production process but conversion costs are uniformly applied throughout the production process. The following data about the Packaging Department. were taken from the companys accounting records: In 1 January 2016, there were 20,000 units in the work in process inventory that were 40% completed and 150,000 units in the finished goods inventory. The company sold 300,000 units during January. Sales price per unit is $7. There were 32,000 units, which were 75% complete as to conversion costs, in the work in process inventory and 120,000 units in the finished goods inventory at the end ofJanuary. Cost data are summarized below: WIP 1 January 2016 Cost per equivalent unit Direct Materials $ 34,900 Materials $2.45 Conversion costs $ 41,500 Conversion $3.15 Required: 1. How many units were transferred from the Packaging Department to the Finished Goods Department during the month? 2. What were the equivalent units of production for direct materials and conversion costs for the month of January? 3. Compute the total costs incurred in January for (a) materials and (b) conversion. 4. Compute (a) the cost of WIP Inventory as of 31 January 2016 and (b) the cost of units completed and transferred out during the month. 5. What is the cost of goods sold by taking the unit cost data from the answers to requirement 3 above? 6. Assuming conversion cost consists 40% of labour costs and that manufacturing overhead cost is 60% fixed cost, calculate how many units ABC Company must sell to breakeven during January. Show all necessary formula and computations. Answer: 1:- 2,70,000 units were transferred from packaging department to finished goods during the month of January. The details is as follows:- i) Calculation for Unit Transferred from Packaging Dep. to Finished Goods :- Particulars Units Closing Stock of Finished Goods 120000 Add : Sales during the Month 300000 Less : Opening Stock of Finished Goods 150000 Units Transferred from WIP to FG 270000 2:- The equivalent units of direct material and conversion cost for the month are shown in the following table:- ii) Equivalent Units for Direct Material and Conversion Cost :- Direct Material Conversion Cost Particulars Total Units Percentage Equivalent Units Percentage Equivalent Units Total Goods manufactured in the month 250000 100% 250000 100% 250000 Opening Stock of WIP 20000 0% 0 60% 12000 Closing Stock of WIP 32000 100% 32000 75% 24000 TOTAL 282000 286000 3:- Total Cost, incurred for direct materials and conversion cost, are calculated below:- iii) Computation of Total Direct Material Conversion Cost:- Particulars Per Unit Cost Equivalent Units Total Cost Direct Material 2.45 282000 690900 Conversion Cost 3.15 286000 900900 4: Both of the cost of Closing WIP and cost of Units completed and transferred during the month are ascertained and exhibited below:- iv) Cost of Closing WIP and Units Completed Transferred:- Particulars Total Units % of Consumption Cost per Unit Total Amount a) Cost of Closing WIP Inventory:- Direct Material 32000 100% 2.45 78400 Conversion Cost 32000 75% 3.15 75600 Total Cost of Closing WIP Inventory 32000 154000 b) Cost of Units Completed Transferred:- Direct Material 250000 100% 2.45 612500 Conversion Cost 250000 100% 3.15 787500 Cost of Units Completed during the month 250000 1400000 Direct Material 20000 0% 2.45 0 Conversion Cost 20000 60% 3.15 37800 Cost of Opening WIP completed in the month 20000 37800 Total Cost of Units Completed Transferred during the Month 270000 1437800 5: The cost of goods sold is computed in the table below:- v) Computation of Cost of Goods Sold:- Particulars Amount Amount Unit Cost per Unit Direct Material 690900 Conversion Costs 900900 Factory Cost 1591800 Opening WIP Inventory 76400 Less : Closing WIP Inventory 154000 -77600 Cost of Goods Manufactured 1669400 Opening Finished Goods Inventory 840000 Less : Closing Stock of Finished Goods 672000 168000 Cost of Goods Sold 1837400 300000 6.12 6: The Break Even Point as per the given point is as follows:- vi) Break Even Point :- Particulars Amount Amount Total Cost Per Unit of Goods Sold 6.12 Less : Direct Material 2.45 Labour Cost 1.26 3.71 Contribution Per Unit 2.41 Fixed Cost Manufacturing Cost Overhead 540540 Break Even Point in Unit (Fixed Cost/Contribution p.u.) 223857 Note : All the calculation are shown in the attached spread sheet. Bibliography:- Alhabeeb, M.J., 2012. Breakà ¢Ã¢â€š ¬Ã‚ Even Analysis.Mathematical Finance, pp.247-273 Vanderbeck, E.J., 2012.Principles of cost accounting. Cengage Learning