Question

Johnson, Inc. manufactures car seats in its Houston plant. Each car seat passes through the Assembly Dept and the Testing Dept. This problem focuses on the Assembly Dept. the process-costing system at Johnson, Inc. has a single direct-cost category (direct materials) and a single indirect-cost category (conversion costs). Direct materials are added at the beginning of the process. Conversion costs are added evenly during the process. When the Assembly Dept finished work on each car seat, it is immediately transferred to Testing.

Johnson, Inc. uses the First In First Out Method of process costing. Data for the Assembly Dept for June 2016 is:

                                                      Physical Units             Direct                  Conversion     

                                                (Car Seats)                 Materials           Costs

Work-in-process, June 1*             5,000               $1,250,000      $402,750

Started during Jun 2016              20,000

Completed during Jun 2016        22,500

Work-in-process Jun 30**            2,500

Total costs added during

   June 2016                                                           $4,500,000      $2,337,500

*Degree of completion: DM ?%; CC 60%

**Degree of completion: DM ?%; CC 70%

1. For each cost category; compute equivalent units in the Assembly Dept. Show

      physical units in the first column of the schedule.

2. For each cost category, summarize total Assembly Dept costs for June 2016 and

             calculate the cost per equivalent unit.

3. Assign total costs to units completed and transferred out and to units in ending Work in Process

     

4. Prepare the journal entry to move costs from WIP-Assembly Dept to the WIP-         

Testing Department.

Answer 1

		Material	Conversion Costs
Units to account for
Beginning Work in process	5000
Units started	20000
Total Units to account for	25000
Units accounted for
Inventory in Process, Beginning	5000	0	2000
Started and completed	17500	17500	17500
Units transferred	22500	17500	19500
Equivalent units in ending WIP	2500	2500	1750
Total units accounted for	25000
Equivalent units of production		20000	21250
	Material	Conversion Costs
Cost added during the production	$   4,500,000	$ 2,337,500
Equivalent units of production	20000	21250
Cost per Equivalent unit	$         225.00	$        110.00
	Material	Conversion Costs	Total
Inventory in Process, Beginning	$   1,250,000	$      402,750	$    1,652,750
Costs incurred	$   4,500,000	$ 2,337,500	$    6,837,500
Total Costs to be accounted for			$    8,490,250
Costs allocated
Inventory in Process, Beginning	$   1,250,000	$      402,750	$    1,652,750
To completed beginning inventory	$                   -	$      220,000	$       220,000
Total Cost of Work in Process	$   1,250,000	$      622,750	$    1,872,750
Started and completed	$   3,937,500	$ 1,925,000	$    5,862,500
Transferred to next Department			$    7,735,250
Inventory in Process, Ending	$       562,500	$      192,500	$       755,000
Total Costs accounted for			$    8,490,250

Account Titles	Debit	Credit
Work in Process Inventory - Testing	$   7,735,250
Work in Process Inventory - Assembly		$ 7,735,250