Question

The Cutting Department of Karachi Carpet Company provides the following data for January. Assume that all materials are added at the beginning of the process.

Work in process, January 1, 15,000 units, 80% completed		$171,600*
*Direct materials (15,000 × $8)	$120,000
Conversion (15,000 × 80% × $4.3)	51,600
	$171,600
Materials added during January from Weaving Department, 231,200 units		$1,861,160
Direct labor for January		429,748
Factory overhead for January		525,248
Goods finished during January (includes goods in process, January 1), 233,800 units		—
Work in process, January 31, 12,400 units, 45% completed		—

a. Prepare a cost of production report for the Cutting Department. If an amount is zero or a blank, enter in "0". For the The rate used to allocate costs between completed and partially completed production.cost per equivalent unit computations, round your answers to two decimal places.

Units charged to production:
Inventory in process, January 1
Received from Weaving Department
Total units accounted for by the Cutting Department
Units to be assigned costs:
		Equivalent Units
	Whole Units	Direct Materials	Conversion
Inventory in process, January 1
Started and completed in January
Transferred to finished goods in January
Inventory in process, January 31
Total units to be assigned cost
Cost Information
Cost per equivalent unit:
		Direct Materials	Conversion
Total costs for January in Cutting Department		$	$
Total equivalent units
Cost per equivalent unit		$	$
Costs assigned to production:
	Direct Materials	Conversion	Total
Inventory in process, January 1			$
Costs incurred in January
Total costs accounted for by the Cutting Department			$
Costs allocated to completed and partially completed units:
Inventory in process, January 1 balance			$
To complete inventory in process, January 1	$	$
Cost of completed January 1 work in process			$
Started and completed in January	$
Transferred to finished goods in January			$
Inventory in process, January 31
Total costs assigned by the Cutting Department			$

b. Compute and evaluate the change in cost per equivalent unit for direct materials and conversion from the previous month (December). If required, round your answers to two decimal places.

	Increase or Decrease	Amount
Change in direct materials cost per equivalent unit	Increase Decrease Increase	$
Change in conversion cost per equivalent unit	Decrease Decrease Increase	$

Answer 1

Solution a:

Karachi Carpet Company
Cost of Production Report - Cutting Department
For the Month Ended January 31
Unit Information
Units charged to production:
Inventory in process, January 1			15000
Received from Weaving Department			231200
Total units accounted for by the Cutting Department			246200
Units to be assigned costs:
		Equivalent Units
	Whole Units	Direct Materials (1)	Conversion (1)
Inventory in process, January 1	15000	0	3000
Started and completed in January	218800	218800	218800
Transferred to finished goods in January	233800	218800	221800
Inventory in process, January 31	12400	12400	5580
Total units to be assigned costs	246200	231200	227380
Cost Information
Costs per equivalent unit:
		Direct Materials	Conversion
Total costs for January in Cutting Department		$1,861,160.00	$954,996.00
Total equivalent units		231200	227380
Cost per equivalent unit (2)		$8.05	$4.20
Costs assigned to production:
	Direct Materials	Conversion	Total
Inventory in process, January 1	$120,000.00	$51,600.00	$171,600.00
Costs incurred in January	$1,861,160.00	$954,996.00	$2,816,156.00
Total costs accounted for by the Cutting Department	$1,981,160.00	$1,006,596.00	$2,987,756.00
Costs allocated to completed and partially completed units:
Inventory in process, January 1 balance	$120,000.00	$51,600.00	$171,600.00
To complete inventory in process, January 1	$0.00	$12,600.00	$12,600.00
Cost of completed January 1 work in process	$120,000.00	$64,200.00	$184,200.00
Started and completed in January	$1,761,340.00	$918,960.00	$2,680,300.00
Transferred to finished goods in Janaury (3)	$1,881,340.00	$983,160.00	$2,864,500.00
Inventory in process, January 31 (4)	$99,820.00	$23,436.00	$123,256.00
Total costs assigned by the Cutting Department	$1,981,160.00	$1,006,596.00	$2,987,756.00

Solution b:

Particulars	Increase or Decrease	Amount
Change in direct materials cost per equivalent unit ($8.05 - $8)	Increase	$0.05
Change in conversion cost per equivalent unit ($4.30 - $4.20)	Decrease	$0.10