CMA Study Group

Answer for Process Costing

  • 1.  Answer for Process Costing

    Posted 13 days ago
    Can anyone show how to solve this problem? I try to work on it but the result is not on the multiple choice. Thank you.

    Fashion Inc. manufactures women's dresses using cotton and polyester. Since the same style dresses are made out of both fabrics, Fashions uses operation costing. During June, 1,000 cotton dresses were completely produced. Also during June, 1,500 polyester dresses were started by adding all materials at the beginning of the process. Of these 1,500 dresses, 700 were completely finished and the remainder were 25 percent complete by the end of the month. There was no work-in-process inventory at the beginning of June. Costs incurred during June were as follows.

    Cotton

    $10,000

    Polyester

    22,500

    Conversion costs

    13,300

    The cost per unit to manufacture one polyester dress during June was:

    $20.32.

    $29.78.

    $22.00.

    $23.87.



    ------------------------------
    Jenny Turnham
    Student
    Brooklyn Park MN
    United States
    ------------------------------


  • 2.  RE: Answer for Process Costing

    Posted 13 days ago
    Hello Jenny,

    I think the answer is: $22.0
    .
    Total equivalent Polyester units completed in June = (700 x 100%) + [(1500 - 700) x 25%] = 900 dresses
    Total direct Material cost for equivalent units = $22,500 x (900 / 1500) = $13,500 ... (Remainder balance of $9,000 for ending inventory)
    Conversion cost allocation = $13,300 x 900 / (1,000 + 900) = $6,300 for Polyester dresses
    Total manufacturing cost for Polyester dresses = $13,500 + $6,300 = $19,800​​
    Manufacturing cost per unit = $19,800 / 900 = $22.0

    Note:
    Conversion cost of $13,300 is combined of direct labor & manufacturing overhead costs for both Cotton & Polyester lines. Allocated between Cotton & Polyester dresses based on equivalent finished products.

    Hope this demonstration will be clear for you

    Kind regards

    ------------------------------
    Samer Ahmad, FMVA, SCA
    Kuwait
    ------------------------------



  • 3.  RE: Answer for Process Costing

    Posted 13 days ago

    Thank you Samer for kind help,

    Jenny

     






  • 4.  RE: Answer for Process Costing

    Posted 12 days ago
       Hi, Samer I am confused with your calculation.The completed units for polyester is 700 only, why in your calculations became 900 units?. Thanks. 

    This is my calculation,  we arrived in the same cost per unit but I have confusion with the 900 units .
    Thanks
     
                                           Material                              CC
    Polyester                           EUP                                    EUP

    Completed 700               700                                       700
    WIP End     800               800                                        200
     Total          1500            1500                                      900

    Cost per unit:

    Material  22500/1500 = 15
    CC          6300/900=          7
    Tor
    Total Cost /unit               22






  • 5.  RE: Answer for Process Costing

    Posted 11 days ago
    700 work done
    25% work in process
    now total 900 unit for end of june.

    ------------------------------
    Syed Kashif Bukhari
    Unemployed
    Karachi
    Pakistan
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  • 6.  RE: Answer for Process Costing

    Posted 11 days ago
    Hi Marlon,

    Actually, the confusion caused by mentioning the word "completed" instead of "produced" for 900 dresses, by splitting it into 700 completed & 200 equivalent 25% WIP .. (As thankfully mentioned by our friend Syed)
    Anyhow, the concept & result are the same for both calculations of allocated production cost.

    Kind regards

    ------------------------------
    Samer Ahmad, FMVA, SCA
    Kuwait
    ------------------------------