Question

Cost of Production and Journal Entries

Lighthouse Paper Company manufactures newsprint. The product is manufactured in two departments, Papermaking and Converting. Pulp is first placed into a vessel at the beginning of papermaking production. The following information concerns production in the Papermaking Department for March.

Account Work in Process—Papermaking Department							Account No.
Date		Item	Debit		Credit		Balance
							Debit		Credit
Jan.	1	Bal., 9,300 units, 70% completed					10,602
	31	Direct materials, 49,600 units	94,240				104,842
	31	Direct labor	26,470				131,312
	31	Factory overhead	14,882				146,194
	31	Goods transferred, 55,400 units			?		?
	31	Bal., 3,500 units, 80% completed					?

a1. Prepare the March journal entry for the Papermaking Department for the materials charged to production.

	Work in Process-Papermaking Department
	Materials-Pulp

a2. Prepare the March journal entry for the Papermaking Department for the conversion costs charged to production. If an amount box does not require an entry, leave it blank.

	Work in Process-Papermaking Department
	Wages Payable
	Factory Overhead

a3. Prepare the March journal entry for the Papermaking Department for the completed production transferred to the Converting Department. If required, round your interim calculations to two decimal places and your final answer to the nearest dollar.

	Work in Process-Converting Department
	Work in Process-Papermaking Department

b. Determine the Work in Process—Papermaking Department March 31 balance. If required, round your interim calculations to two decimal places and your final answer to the nearest dollar.
$

Answer 1

a.

	General Journal	Debit	Cedit
1.	Work in process-Papermaking Department	$94,240
	Materials-Pulp		$94,240
2	Work in process-Papermaking Department	$41,352
	Wages payable		$26,470
	Factory overhead		14,882
3.	Work in process-Converting Department	$137,304
	Work in process-Papermaking Department		$137,304

b.

Work in process-Papermaking department, March 31 balance:

Direct material (3,500*$1.9)	$6,650
Conversion (2,800*$0.8)	2,240
Total costs	$8,890

Work in process-Papermaking department, March 31 balance = $8,890

1. Equivalent units of production:

		Equivalent units
	Physical units	Materials	Conversion
Units in beginning work in process	9,300		2,790(9,300*30%)
Units started and completed	46,100	46,100	46,100
Units completed and transferred	55,400
Units in ending inventory	3,500	3,500	2,800 (3,500*80%)
Total		49,600	51,690

2. Cost per equivalent unit:

	Material	Conversion
Cost incurred during the period	$94,240	$41,352
Equivalent units	49,600	51,690
Cost per equivalent units	$1.9	$0.8

3. Cost of units completed and transferred:

Cost of beginning work in process:
Beginning balance	$10,602
Add: Cost incurred during the period (2,790*$0.8)	2,232	$12,834
Cost of units started and completed;
Direct material (46,100*$1.9)	87,590
Conversion (46,100*$0.8)	36,880	124,470
Total costs		$137,304