Sep 18, 2017

COST OF PRODUCTION REPORT – FIFO METHOD; SPOILED UNITS COST CHARGED TO FACTORY OVERHEAD. AT THE…

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Cost of Production Report – Fifo Method; Spoiled Units Cost Charged to Factory Overhead. At the beginning of the month of October the accountant of the Tulsa Processing Company drew up a new form to be used for the cost of production statement for the month. He inserted in the form the ending work in process inventory figure for the month of September in the amount of $3,144. This inventory consisted of 160 units with all materials included but only 50% of the labor and overhead.

During the month of October the Cost Department gathered and recorded the following production and cost data and other information:

Purchases of materials:

Materials used for:

Invoice cost

$82,600

Production

$84,868

Freight in

13,444

Equipment maintenance….

1,940

Total materials cost

596,044

Factory supplies

8,636

Total cost of materials used

$95,444

Payroll:

Other factory overhead:

Direct labor

$56,760

Heat

$ 480

Supervision

5,800

Payroll taxes

2,800

Indirect labor

6,048

Rent of building

2,400

Equipment maintenance..

1,360

Power

3,224

Total payroll

$69,968

Tools

4,000

Equipment depreciation

8,000

Total factory overhead

$20,904

Production data for the month of October:

In process October 31: 168 units, all materials, 3/7 labor and overhead. Started: 6,928 units, all materials placed in production.

Spoiled: 128 units, all materials, 3/4 labor and overhead; these spoiled units have no salvage value. The material and labor cost spent on these spoiled units is added to the factory overhead.

Finished: 6,792 good units. Inventories are costed by the fifo method.20% of the building is occupied by and charged to the Sales Department as heat and rent expense.

Required: (1) Equivalent production figures.

  1. A cost of production report.
  2. The unit cost for the three elements of cost. Carry unit cost computa­tions to two decimal places.
  3. The cost of the work transferred out and the ending work in process inventory.

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