Part 2: Process Costing Intrepid Industries manufactures sterile parts used in medical equipment. The company uses the weighted-average process costing method to account for production costs. It produ

Part 2: Process Costing

Intrepid Industries manufactures sterile parts used in medical equipment. The company uses the weighted-average process costing method to account for production costs. It produces parts in three different departments: Forming, Sterilization, and Assembling. The following information was reported for the Assembling Department for the month of June:

Beginning work-in-progress inventory on June 1 had 250,000 units made up of the following:

Amount

Degree of Completion

Prior department costs transferred in from the Forming Department

$387,600

100%

Costs added by the Steril-ization Department:

Direct materials

317,200

100%

Direct labor

120,050

40%

Manufacturing overhead

67,100

30%

$504,350

Work in process, June 1

$891,950

During June, 580,000 units were transferred in from the Forming Department at a cost of $1,870,000. The Assembling Department added the following costs:

Assembling finished 480,000 units and transferred them to the Sterilization Department. At June 30, the number of units in ending work-in-progress inventory was 350,000. The degree of completion of work-in-process inventory at June 30 was as indicated below:

Prepare a correctly formatted (including heading) production cost report (seeExhibit 8.11 as a example report) using the weighted-average method.

Managementwantstolowerthecostsofmanufacturingtheparts.Ithasestablished the following per unit targets for this product in the Assembling Department: materials,$1.65; labor, $.62; and manufacturing overhead $0.48. Has the product achievedmanagement’s cost targets in the Assembling Department? Write a short report tomanagement containing your answer(s).

© PENN FOSTER, INC. 2017 COST ACCOUNTING PAGE 4Graded Project

Direct materials

$974,800

Direct labor

318,600

Manufacturing overhead

202,000

Total costs added

$1,495,400

Direct materials

80%

Direct labor

65

Manufacturing overhead

30

C. Prepare a correctly formatted (including heading) production cost report (seeExhibit 8.12 as a example report) using the FIFO method using the data given in Question A with one exception: the beginning direct materials costs as of June 1listed in work-in-process should be $315,700 instead of $317,200.

D. Using data from the FIFO report, write a short report to management addressingthe issues raised in Question B.