The Potato Division of Global Foods Company processes potatoes, In the process, raw potatoes are

The Potato Division of Global Foods Company processes...

Key Concepts

Accretion and Shrinkage in Production

Accretion and shrinkage refer to unexpected changes in the weight or volume of products during production. Accretion may occur when products gain weight, often due to moisture absorption or other additives, while shrinkage refers to weight loss not accounted for as normal process losses such as peel removal. Understanding and monitoring these factors is important to ensure that production measurements accurately reflect yield, control quality, and adjust cost calculations appropriately.

Weighted Average Method

The weighted average method is a technique in process costing that combines costs from beginning work in process with costs incurred during the current period. It calculates a single average cost per unit, which is then applied to both completed units and units still in process. This method simplifies cost calculations in systems with continuous production flows by smoothing cost differences over different production periods.

Spoilage Accounting

Spoilage accounting involves identifying and accounting for product losses that occur during the production process. It distinguishes between normal spoilage, which is expected and often incorporated into the cost of production, and abnormal spoilage, which exceeds expected limits and is usually treated separately. Understanding and tracking spoilage is essential for proper cost allocation and for identifying areas where process improvements may reduce waste.

Process Costing

Process costing is an accounting method used in industries where production is continuous and homogeneous. It involves tracking costs through a series of production stages and assigning them to large batches of similar items, rather than individual units. This approach helps in evaluating the cost of production at various points in the process and is commonly applied in industries like food processing, chemicals, and textiles.

Equivalent Units of Production

Equivalent units of production are a measure used in process costing to assign costs to partially completed units in work in process. By converting partially completed units into an equivalent number of fully completed units based on their completion percentage, companies can more accurately spread production costs across completed products and remaining inventory. This calculation is pivotal for precise cost measurement and performance evaluation in production environments.

Transcript

00:01 So frito -lay incorporation manufactures, convenience food, including potato chips and corn chips.

00:07 And production of corn chips occurs in four departments, cleaning, mixing, cooking, and drying and packaging.

00:12 Or as to consider the drying and packaging departments where direct materials and packaging are added at the end of the process.

00:20 And conversion costs are added evenly during the process and the accounting records of a fritolay plant provides the following information for corn chips.

00:30 With its drying and packaging department during a weekly period week 37.

00:36 We are given a table that shows the physical units, the transfer of the cost, the direct materials, and the conversion costs.

00:43 And the first question is, using the weighted average method, summarized the total drying and packaging department costs for week 37, and assigned total cost to units completed and transferred out and to units in ending working process.

01:00 So that's the first thing we're going to be doing now so for that so step one and two we're going to summarize the outputs in physical units and compute outputs in equivalent units the weighted average method of process cutting costing so summarize output in fiscal units and compute outputs equivalent units weighted average method of process cutting so the drying and packaging department or frito laid incorporation for week 37 so it should look like this so we're gonna have the flow of production over here and we're gonna have step one okay i'm going to have the table look like this and we're going to have step one physical units and then we're going to have step two and then we have the transferred in cost then we have the direct materials and then we have the conversion costs and then step two is the equivalent units right so the first floor of production we have the working process beginning or the wip and that is 1 ,200 fiscal units we have transferred in during current period and then this is 4 ,200 and then to account for will be the total and the total would basically be 5 ,400 now completed and transferred out during current period during current period and this to be 4 ,000 now the working process ending in the giving period would be 1 ,400 and then we basically calculate this so this will be 1 ,400 multiplied by 100 % comma 1 ,400 multiplied by 0 % comma, 1 ,400 multiplied by 50%.

06:07 So the amount accounted for the amount accounted for would be 5 ,400.

06:23 So now the equivalent unit of work done to date will basically be that.

06:42 So now, moving on to the transferred in cost, we're going to have 4 ,000 over here.

06:51 I'm going to have 4 ,000 over here in direct materials we're going to have 4 ,000 over here in combustion costs so this will be 1 ,400 and this will be 1 ,400 this would be 0 and this will be 700 so now the total for this would be 5 ,400 the total for this will be 4 ,000 which will be addition and the total for this would be 4 ,700.

07:31 So now this is degree in completion in these departments.

07:34 The transfer the in cost, 100%, direct material, 0%, conversion cost, 50%, so that's what it looks like.

07:43 Now, this is step one and step two, right? so step three, four, and five, we to summarize the total cost to account for, compute costs per equivalent units, assigned the total cost and unit completed, completed and soon units in ending working process.

08:02 And the weighted average method of process costing drying and packaging department of frito lace for week 37.

08:09 So we're going to be doing the step three, four and five right now.

08:13 So now we're going to have moving on, this is the end of this.

08:21 So i'm just going to be drawing a line right there.

08:23 And we're going to moving on to step three, four, five.

08:26 So we're going to have step three over here.

08:30 And then the first cost over here will be conversion costs and then over here we have direct materials and in here we have transferred in cost and over here we have total production costs and then this is where the form the writing will be so yeah just like that okay now the step three would be working process beginning and this is given right so the total production cost for working process is 30 ,770 and then we have the cost added in current period and this is also given and we have 142 ,450.

10:13 Now the total will be the cost to account for so we have total cost to account for and then this is one 70 mind you this is in dollars 173 ,000 it's not so clear i'm sorry so this is in dollars and it's 173 ,220 and then transfer the in cost will be the same thing we're giving it so it's 26 ,750 plus 91 ,510 and the amount to account for is 118 ,260 and then for direct materials we have zero over here then we have 23 000 the amount to account for obviously be 23 000 and the commercial cost is 4 000 and 20 and then we have 27 000 490 now rather 940 and the amount to account for will be 31 000 960 so now moving on to step 4 because this was step 3 so we're going to have cost incur to date.

12:11 And then this is going to be 108 ,260.

12:16 Basically, writing what we had here.

12:18 This is 23 ,000.

12:21 And this is 31 ,016.

12:23 Basically, writing what we had from the total from step three.

12:26 And then we're going to divide by equivalent units of work done to date.

12:31 So divide by equivalent units of work.

12:43 Done to date and then we'll basically be dividing by 5 ,400 we'll divide this by 4 ,000 divide this by 4 ,700 and then what you're going to get to be the equivalent unit costs to or rather of work done equivalent unit cost of work done to date.

13:33 So this is going to give you a total of $21 .90 for this.

13:43 This is going to give you a total of $5 .75.

13:48 And this is going to give you a total of $6 .80.

13:53 So that's that.

13:54 That's for step four.

13:56 Now moving on to step five, we're going to have the assignment of costs.

14:21 So we have assignments of course.

14:22 So we have assignments of cost and the first thing is the completion of transferred out completed and transferred out and this is 4 ,000 units so this is going to be for the first one mind you it's going to be 137800 the second one is so for this one we're going to have 4 ,000 rastapar three multiplied by 21 .90.

15:37 This one we're going to have 4 ,000 raised apart 3 multiplied by 5 .75.

15:48 For this we're going to have 4 ,000 waste apart 3 multiplied by 6 .80.

15:57 So the next thing is the work -in process ending and this is um 1 ,400 units and this is going to be 35 ,420 this is going to be 1 ,400 multiplied by $21 .90 and then this is going to be one zero rist of part b multiplied by $5 .75 and this is going to be 700 which to part b.

16:50 Multiplied by 6 .80 and then the total would be the total cost accounted for so this will give you 173 ,220 this will give you 118 ,260 um i'm sorry about that this is 260 this will give you all 23 000 you and this will give you 301 ,960 so this is basically the end of it and the 8 parts would be equivalent units completed and transferred out from step 2 and b parts is the equivalent unit in ending walk -in process from step 2 so moving on to the second part of the question number two.

19:19 It says, assume that the feeful method is used for the drying and packaging department.

19:28 Under feeful, the transfer in -cost for work -in process beginning eventually in week 37 are $28 ,920 instead of $26 ,750 under the weighted average method and the transferred -in -cost during week 37 from the cooking department or 93 ,660 instead of 91 ,510 under the weighted average method...

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