Exercise 16-6 The Cutting Department of Cassel Company has the following product

Question

Exercise 16-6

The Cutting Department of Cassel Company has the following production and cost data for July.

Production

Costs

Materials are entered at the beginning of the process. Conversion costs are incurred uniformly during the process.

(a) Determine the equivalent units of production for (1) materials and (2) conversion costs.

Materials

Conversion Costs

(b) Compute unit costs. (Round unit costs to 2 decimal places, e.g. 2.25.)

Prepare a cost reconciliation schedule.

Cost Reconciliation

Costs accounted for

   Transferred out

   Work in process, July 31

      Materials

      Conversion costs

         Total costs

Production

Costs

1. Transferred out 12,200 units. Beginning work in process $0 2. Started 4,800 units that are 60% Materials 59,500 complete as to conversion Labor 9,796 costs and 100% complete as Manufacturing overhead 23,380 to materials at July 31.

Explanation / Answer

(b) Unit costs should be computed as follows:

Unit cost for materials = $59,500 / 17,000 = $3.5

Unit cost for conversion costs = ($9,796 + $23380) / 15,080 = $2.2

(c) Cost reconciliation should be prepared as follows:

Cost accounted for       Transferred out (12,200 units × $5.7) 69540       Work in process on July 31:             Materials (4,800 units × $3.5) 16800             Conversion costs (4,800 × $2.2) 10560 Total costs 96900

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