Question

The Company uses a single department production process. Materials are added at the start of the production process and labor and overhead are added as indicated. For January 2018, the Company records have the following information:

UNITS:
Beginning WIP:                                                                                                          10,000 units

100% complete for materials, 50% complete for labor; 3% complete for overhead

Units started in process                                                                                               50,000 units

Units completed                                                                                                          49,000 units

Ending WIP:                                                                                                             11,000 units

100% complete for materials, 60% complete for labor; 20% complete for overhead

PRODUCTION COSTS:

Work in Process, Beginning of the Month:
Materials                                          $ 22,000
Labor                                                   18,000
Overhead                                            11,000             51,000

Current Month Costs:
Materials                                          $ 320,000
Labor                                                   180,160
Overhead                                            152,840           653,000

                                    Total Costs:                        $   704,000

Prepare a Cost of Production Summary using the FiFO method (calculations for equivalent units of production, cost per equivalent unit of production, total cost for units completed and WIP, ending). Prepare your calculations for Materials, Labor, and Overhead separately. Prepare the appropriate journal entries at month end.

Answer 1

(i) Calculate equivalent units for materials and conversion costs.
Company
Production Cost Report- Mixing Department
For the Month Ended January 31
UNITS			Equivalent Units
	Physical Units	% to complete	Materials	% to complete	Labor	% to complete	Overhead
Units to account for:
Work in process, beginning	10000
Started into production	50000
Total units to account for	60000
Units accounted for:
Work in process, beginning	10000	0%	0	50%	5000	97%	9700
Started and completed in January (49000-10000)	39000	100%	39000	100%	39000	100%	39000
Units completed	49000	100%	39000	100%	44000	100%	48700
Work in process, Ending	11000	100%	11000	60%	6600	20%	2200
Total units accounted for	60000		50000		50600		50900
(ii). costs per equivalent unit.
COSTS	Costs
	Direct Materials	Labor	Overhead	Total Costs
Costs to account for:
Cost of beginning Work in process	$        22,000	$        18,000	$         11,000	$         51,000
Total Costs added during January	$      320,000	$      180,160	$       152,840	$       653,000
Total Costs to account for	$      342,000	$      198,160	$       163,840	$       704,000
Total Costs added during January	$      320,000	$180,160	$       152,840	$       653,000
÷ Equivalent units	50,000	50,600	50,900
Cost per equivalent unit	$6.40	$3.56	$3.00	$12.96
Cost accounted for:
Cost of beginning Work in process	$        22,000	$        18,000	$         11,000	$         51,000
Costs added into Beg. WIP during January	$                -	$17,802	$29,127	$         46,929
Total Cost of beginning WIP	$        22,000	$        35,802	$         40,127	$         97,929
Cost of units started and completed in January	$      249,600	$      138,858	$       117,107	$       505,566
Units Completed	$      271,600	$      174,661	$       157,234	$       603,495
Cost of Ending Work in proces inventory	$70,400	$23,499	$6,606	$100,505
Total costs accounted for	$      342,000	$      198,160	$       163,840	$       704,000
Computation of Cost of Beginning WIP , Ending Work in proces inventory and Cost of units Transferred out:-
	Equivalent units	Cost per equivalent unit		Total
Cost added into Beginning Work in proces inventory
Direct Materials	0	$6.40	$0
Labor	5000	$3.56	$17,802
Overhead	9700	$3.00	$29,127	$46,929
Cost of units started and completed in January	39000	$12.96		$505,566
Cost of units completed				$552,495
Cost of Ending Work in proces inventory
Direct Materials	11000	$6.40	$70,400
Labor	6600	$3.56	$23,499
Overhead	2200	$3.00	$6,606	$100,505
Total costs accounted for				$653,000

Journal entries
Date	Particulars		L.F	Debit		Credit
Jan. 31	Work in Process Inventory                                         Dr.			$   653,000
	To Raw Materials A/c					$   320,000
	To Wages payable A/c					$   180,160
	To Manufacturing Overheads A/c					$   152,840
	(To record cost incurred for production)
Mar. 31	Finished Goods Inventory                                                 Dr.			$   603,495
	To Work in Process Inventory					$   603,495
	(To record cost of units completed)

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