Question 1 Rayol Inc uses a process cost system to accumulate the costs it incurs to produce aluminum stabilizers from recycled aluminum cans. The July 1 inventory in the finishing department consisted of 63,000 units, fully complete as to materials and 80 per cent complete as to conversion. The beginning inventory cost $288,000 consisted of $216,000 of costs transferred in from the molding department conversion costs (conversion costs are direct labor and overhead). The costs incurred in the finishing department for July appear as follows: Costs transferred from molding department $720,000 (excluding costs in beginning inventory) Costs added in finishing department in July: (Excluding costs in beginning inventory): $63,600 Materials 131,376 Conversion costs $914,976 The finishing department received 120,000 units from the molding department in July. During July, 127,200 units were completed by the finishing department and transferred out. As of July 31, 28,800 units, complete as to materials and 60% complete as to conversion, were left in inventory of the finishing department. a. Using the average cost procedure, prepare a production cost report for the finishing department for July. b. Compute the average unit cost for conversion in the finishing department in June. Question 2 In 2013, Adam opened Adam’s Pets, a small retail shop selling pet supplies. On December 31, 2013, the accounting records of Adam’s Pets showed the following: Inventory on Dec 31, 2013 $20,400 Inventory on Jan 1, 2013 30,200 Sales Revenue 114,000 Utilities Expense for the shop 7,800 Rent for the shop 8,200 Sales Commissions 4,300 Purchases of Merchandise Inventory 54,000 a. Prepare an income statement for Adam’s Pets for the year ended December 31, 2013 b. Adams’s Pets sold 8,500 units. Determine the unit cost of the merchandise sold.
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