Question

Valentine Accessories Plus produces brass handles for the furniture industry in a four-stage process –Mixing, Moulding, Polishing and Packaging. Costs incurred in the Polishing Department during January are summarized as follows: WIP - Polishing Process A/C January 1 Bal. Transfer from Moulding Direct Materials Added Direct Labour Manufacturing Overhead 20,000 $ 0 1,310,000 391,600 638,000 307,400 Normal losses are estimated to be 2½% of input during the period. Inspection takes place during the processing operation, at which point damaged handles are separated from good handles and sold as scrap to local furniture manufacturers at $85 each. At inspection, 2,000 handles were rejected as scrap. These units had reached the following degree of completion: Transfer from Moulding 100% Direct material added 40% Conversion costs 20% Work-in-progress at the end of January was 4,000 handles and had reached the following degree of completion: Transfer from Moulding 100% Direct material added 80% Conversion costs 50% Direct materials added and conversion costs are incurred uniformly throughout the process. Required: (a) Compute the equivalent units and cost per equivalent units for direct materials (From Moulding & Direct materials added) and conversion costs. (b) Compute the:  cost of the unexpected losses  total cost of the handles completed and transferred out of the Packaging Department  cost of ending work in process inventory in the Polishing Department (c) Complete the Work in Process Inventory – Polishing Process T-account, clearly showing the ending balance. (d) Prepare the journal entries for the:  assignment of direct materials, direct labour incurred and the manufacturing overhead applied to the Polishing Process  cost of the units completed and transferred out to the Packaging Process (e) Given that 30% of the unexpected losses were as a result of pilferage, calculate Valentine Accessories true loss for the Polishing Department.

Answer 1

statement of equivalent units

in out    equivalent units

particulars units particulars units transfer material material labour conversion

% units % units % units % units

introduced 20,000 completed 13500 100 13500 100  13500 100 13500 100 13500 scrap 2000 100 2000 40 800 20 400 20 400

WIP 4000 100 4000 80 3200 50 2000 50 2000

normal loss 500

total 20,000 20000 19500 17500 15900    15900

statement of cost per unit

particular element of cost

transferred material direct material labour overhead total

total cost incurred 1310000 391600 638000 307400 2647000

equivalent units 19500 17500 15900 15900

cost per unit 67.18 22.38 40.125 19.33

(b) cost of unexpected loss( units 2000)

transferred cost of material 67.18*2000= 134360

direct material 22.38*2000= 44760

labour cost 40.125*2000= 80250

overhead cost 19.33*2000= 38660

total cost 298030

cost of handles completed and out for packing department ( units 13500)

transferred cost of material 67.18*13500= 906930

direct material 22.38*13500= 302130

labour cost 40.125*13500= 541687

overhead cost 19.33*13500= 260955

   total cost 2011702

cost of ending work in progress (units 4000)

transferred cost of material 67.18*4000= 268720

direct material 22.38*4000= 89520

labour cost 40.125*= 160500

overhead cost 19.33*4000= 77320

total cost 596060