Question

Diane Barone was a good friend of yours in high school and is from your home town. While you chose to major in accounting when you both went away to college, she majored in marketing and management. You are now to accounting manager for snack foods division of Melton enterprises. Your friend diane was promoted to regional sales manager for the same division in Melon. Diane recently telephoned you. She explained that she was familiar with job cost sheets, which had been used by the special projects division where she had formerly worked. She was, however, very uncomfortable with the production cost reports prepared by your division. She emailed you a list of her particular questions.

1. Since Melton occasionally prepares snack foods for special orders in the snack foods division, why don't we track costs of the orders separately?

2. What is an equivalent unit?

3.Why am I getting 4 production cost reports? Isn't there one work in process account?

For managerial accounting

Answer 1

1) The company use to track costs of the orders separately because each order is different from each other on 1) itemwise , 2) Inputwise, 3) Costwise and 4)Qualitywise. Therefore, a production report has to be made for the each and every food order separately.

2) An equivalent unit is the estimated complete unit conversion of the incomplete work in progress units alongwith the completed units.

3) Each production process carries different variables like 1) item , 2) Input, 3) Cost and 4)Quality, so it is always important to have different production reports for each and every order and have that many of Work in process accounts.