Case 02: Step-by-Step

Weighted-Average

Process Costing

Timing Technology, Inc. manufactures timing devices, During 2Oxl, 900,000 units were completed and transferred to finished-goods inventory. On December 31, 20xl there were 300,000 units in work in process. These units Finished-goods

were 50 percent complete as to conversation and 100 percent complete as to direct material. inventory consisted of 200,000 units.

Materials are added to reduction at the beginning of the manufacturing

process, and overhead is applied to each product at the rate of 60 percent of direct labor costs. There was no fished-goods inventory on January 1, 20x 1. information: A review of the inventory cost records disclosed the following

Cost Units Work in process, January 1, 20xl (80% completed as to conversion) 20,000 1,000,000 $1,300,000 $1,995,000 $200,000 $315,000 Materials Labor

. Direct material cost

Direct labor cost

Unit started in production

Required: Prepare schedules as of December 31, 20xl, to compute the following:

1. Physical flow of units. 2. Equivalent units of production using the weighted-average method. 3. Cost per equivalent unit for material and conversion. 4. Cost of the December 31, 2Oxl, finished-goods inventory and work-in-process inventory.

(CMA Adapted)

Case 03: Overhead Application

Kamloops Manufacturing Sdn Bhd has just completed a major change in its quality control (QC) process. Previously, products had been reviewed by Q~ inspectors at the end of each major process, and the companys 10 QC inspectors were charged as direct labor to the operation or job. In an effort to improve efficiency and quality, a computerised video QC system was purchased for RM250,000. The system consists of a mini-computer, 15 vedio cameras, other peripheral hardware, and software. The new system uses cameras stationed by QC engineers at key points in the production process. Each times an operation changes or there is a new operation, the cameras are moved, and a new master picture is loaded into the computer by a QC engineer. The camera takes pictures of the units in process, and the computer compares them to the picture of a good unit. Any differences are sent to a QC engineer, who removes the bad units and discusses the flaws with the production supervisors. The new system has replaced the 10 QC inspectors with two QC.engineers.