Question

Equivalent Units and Related Costs; Cost of Production Report; Entries

Wilmington Chemical Company manufactures specialty chemicals by a series of three processes, all materials being introduced in the Distilling Department. From the Distilling Department, the materials pass through the Reaction and Filling departments, emerging as finished chemicals.

The balance in the account Work in Process—Filling was as follows on December 1, 2016:

Work in Process—Filling Department
(3,000 units, 60% completed):
	Direct materials (3,000 x $18)	$54,000
	Conversion (3,000 x 60% x $11.7)	21,060
		$75,060

The following costs were charged to Work in Process—Filling during December:

Direct materials transferred from Reaction
	Department: 38,700 units at $17.8 a unit	$688,860
Direct labor		242,170
Factory overhead		232,670

During December, 38,400 units of specialty chemicals were completed. Work in Process—Filling Department on December 31 was 3,300 units, 90% completed.

Required:

1. Prepare a cost of production report for the Filling Department for December. If an amount is zero, enter "0". If required, round your cost per equivalent unit answers to two decimal places.

Wilmington Chemical Company
Cost of Production Report-Filling Department
For the Month Ended December 31, 2016
Unit Information
Units charged to production:
Inventory in process, December 1
Received from Reaction Department
Total units accounted for by the Filling Department
Units to be assigned costs:
		Equivalent Units
	Whole Units	Direct Materials	Conversion
Inventory in process, December 1
Started and completed in December
Transferred to finished goods in December
Inventory in process, December 31
Total units to be assigned costs
Cost Information
Costs per equivalent unit:
		Direct Materials	Conversion
Total costs for December in Filling Department		$	$
Total equivalent units
Cost per equivalent unit		$	$
Costs charged to production:
	Direct Materials	Conversion	Total
Inventory in process, December 1			$
Costs incurred in December
Total costs accounted for by the Filling Department			$
Cost allocated to completed and partially completed units:
Inventory in process, December 1 balance			$
To complete inventory in process, December 1		$
Cost of completed December 1 work in process			$
Started and completed in December	$
Transferred to finished goods in December			$
Inventory in process, December 31
Total costs assigned by the Filling Department			$

Feedback

1. Calculate equivalent units for materials and conversion costs. Calculate the cost per equivalent unit for materials and conversion costs. Calculate the costs assigned to the beginning inventory, the units started and completed, and the ending inventory.

Learning Objective 2, Learning Objective 3 and Learning Objective 4.

2. Journalize the entries for (1) costs transferred from Reaction to Filling and (2) the cost transferred from Filling to Finished Goods.

(1)
(2)

Feedback

2. Remember that there are three types of inventory; materials, work in process, and finished goods. What costs are captured in the work in process account? Are these units 100% complete or are they being transferred to another department?

Learning Objective 2, Learning Objective 3 and Learning Objective 4.

3. Determine the increase or decrease in the cost per equivalent unit from November to December for direct materials and conversion costs. If required, round your answers to two decimal places.

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

4. The cost of production report may be used as the basis for allocating product costs between and . The report can also be used to control costs by holding each department head responsible for the units entering production and the costs incurred in the department. Any differences in unit product costs from one month to another, such as those in part (3), can be studied carefully and any significant differences investigated.

Answer 1

1)	Wilmington Chemical Company
	Cost of Production Report-Filling Department
	For the Month Ended December 31, 2016
	Unit Information
	Units charged to production:
	Inventory in process, December 1			3000
	Received from Reaction Department			38700
	Total units accounted for by the Filling Department			41700
	Units to be assigned costs:
			Equivalent Units
		Whole Units	Direct Materials	Conversion
	Inventory in process, December 1	3000	0	1200
	Started and completed in December	35400	35400	35400
	Transferred to finished goods in December	38400	35400	36600
	Inventory in process, December 31	3300	3300	2970
	Total units to be assigned costs	41700	38700	39570
	Cost Information
	Costs per equivalent unit:
			Direct Materials	Conversion
	Total costs for December in Filling Department		688860	474840
	Total equivalent units		38700	39570
	Cost per equivalent unit		17.8	12.0
	Costs charged to production:
		Direct Materials	Conversion	Total
	Inventory in process, December 1	54000	21060	75060
	Costs incurred in December	688860	474840	1163700
	Total costs accounted for by the Filling Department	742860	495900	1238760
	Cost allocated to completed and partially completed units:
	Inventory in process, December 1 balance	54000	21060	75060
	To complete inventory in process, December 1	0	14400	14400
	Cost of completed December 1 work in process	54000	35460	89460
	Started and completed in December	630120	424800	1054920
	Transferred to finished goods in December	684120	460260	1144380
	Inventory in process, December 31	58740	35640	94380
	Total costs assigned by the Filling Department	742860	495900	1238760
2)	Work in process-Filling department	688860
	Work in process-Reaction department		688860
	Finished goods inventory	1144380
	Work in process-Filling department		1144380
3)	Conversion costs per equivalent unit for November:
	Direct materials	$              18.00
	Conversion cost	$              11.70
	Change in direct materials cost per equivalent unit	Decrease	$                  0.20
	Change in conversion cost per equivalent unit	Increase	$                  0.30
4)	The requirement is not clear for this part.