Question

Work in Process Account Data for Two Months; Cost of Production Reports

Pittsburgh Aluminum Company uses a process cost system to record the costs of manufacturing rolled aluminum, which consists of the smelting and rolling processes. Materials are entered from smelting at the beginning of the rolling process. The inventory of Work in Process—Rolling on September 1 and debits to the account during September were as follows:

Bal., 400 units, 30% completed:

Direct materials (400 x $3.1)$ 1,240

Conversion (400 x 30% x $1.3)156

$ 1,396

From Smelting Department, 9,320 units$29,824

Direct labor8,672

Factory overhead4,670

During September, 400 units in process on September 1 were completed, and of the 9,320 units entering the department, all were completed except 700 units that were 90% completed. Charges to Work in Process—Rolling for October were as follows:

From Smelting Department, 10,700 units$36,380

Direct labor10,720

Factory overhead5,765

During October, the units in process at the beginning of the month were completed, and of the 10,700 units entering the department, all were completed except 500 units that were 60% completed.

Required:

1. Enter the balance as of September 1 in a four-column account for Work in Process—Rolling. Record the debits and the credits in the account for September. Construct a cost of production report and present computations for determining (a) equivalent units of production for materials and conversion, (b) costs per equivalent unit, (c) cost of goods finished, differentiating between units started in the prior period and units started and finished in September, and (d) work in process inventory. If an amount box does not require an entry, leave it blank.

ACCOUNTWork in Process-Rolling Department ACCOUNT NO.

BALANCE

DATEITEMPOST. REF.DEBITCREDITDEBITCREDIT

Sept. 1Bal., 400 units, 30% completed

Sept. 30Smelting Dept., 9,320 units at $3.2

Sept. 30Direct labor

Sept. 30Factory overhead

Sept. 30Finished goods

Sept. 30Bal., 700 units, 90% completed

If an amount is zero, enter in a zero "0". Round cost per unit answers to the nearest cent.

Pittsburgh Aluminum Company
Cost of Production Report-Rolling Department
For the Month Ended September 30

Whole UnitsEquivalent Units

Units Direct Materials (a)Conversion (a)

Units charged to production:   

Inventory in process, September 1  

Received from Smelting Department  

Total units accounted for by the Rolling Department  

Units to be assigned costs:   

Inventory in process, September 1

Started and completed in September

Transferred to finished goods in September

Inventory in process, September 30

Total units to be assigned costs

Costs

Costs Direct Materials Conversion Total Costs

Cost per equivalent unit:            

Total costs for September in Rolling Department $   $      

Total equivalent units          

Cost per equivalent unit (b) $   $      

Costs assigned to production:            

Inventory in process, September 1         $  

Costs incurred in September           

Total costs accounted for by the Rolling Department         $  

Costs allocated to completed and partially completed units:            

Inventory in process, September 1 balance (c)         $  

To complete inventory in process, September 1 (c) $   $     

Cost of completed September 1 work in process         $  

Started and completed in September (c) $        

Transferred to finished goods in September (c)         $  

Inventory in process, September 30 (d)         

Total costs assigned by the Rolling Department         $  

2. Provide the same information for October by recording the October transactions in the four-column work in process account. Construct a cost of production report, and present the October computations (a through d) listed in part (1). If an amount box does not require an entry, leave it blank.

ACCOUNTWork in Process-Rolling Department ACCOUNT NO.

Balance

DATEITEMPOST. REF.DEBITCREDITDEBITCREDIT

October 1Balance

October 31Smelting Dept., 10,700 units at $3.4

October 31Direct labor

October 31Factory overhead

October 31Finished goods

October 31Bal., 500 units, 60% completed

If an amount is zero, enter in a zero "0". Round cost per unit answers to the nearest cent.

Pittsburgh Aluminum Company
Cost of Production Report-Rolling Department
For the Month Ended October 31

Whole UnitsEquivalent Units

Units Direct Materials (a)Conversion (a)

Units charged to production:   

Inventory in process, October 1  

Received from Smelting Department  

Total units accounted for by the Rolling Department  

Units to be assigned costs:   

Inventory in process, October 1

Started and completed in October

Transferred to finished goods in October

Inventory in process, October 31

Total units to be assigned costs

Costs

Costs Direct Materials Conversion Total Costs

Cost per equivalent unit:            

Total costs for October in Rolling Department $   $      

Total equivalent units          

Cost per equivalent unit (b) $   $      

Costs assigned to production:            

Inventory in process, October 1         $  

Costs incurred in October           

Total costs accounted for by the Rolling Department         $  

Costs allocated to completed and partially completed units:            

Inventory in process, October 1 balance (c)         $  

To complete inventory in process, October 1 (c) $   $     

Cost of completed October 1 work in process         $  

Started and completed in October (c)         

Transferred to finished goods in October (c)         $  

Inventory in process, October 31 (d)         

Total costs assigned by the Rolling Department         $  

3. The cost per equivalent unit for direct materials increased  from August to October. The cost per equivalent unit for conversion costs increased  from August to October. These changes should  be investigated for their underlying causes, and any necessary corrective actions should be taken.

Feedback

Costs accumulate in each department before being transferred to finished goods. There are three types of inventory; materials, work in process, and finished goods.

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. Compare the costs per equivalent unit for January through October. The costs per equivalent units for materials and conversion for January are in the September 1 work in process inventory.

Answer 1

Solotion 1:
Account	Work in Pocess- Rolling Department
				Balance
Date	Item	Debit	Credit	Debit	Credit
01-Sep	Balance			$1,396
30-Sep	Smelting Department	$29,824		$31,220
30-Sep	Direct labor	8672		$39,892
30-Sep	Factory Overhead	4670		$44,562
30-Sep	Finished Goods		$41,440	$3,122
30-Sep	Ending balance			$3,122

Pittsburgh Aluminum Company.
Cost of Production Report-Rolling Department
For the Month Ended September 30
UNITS	Whole Units	Equivalent Units
Direct Materials	Conversion
Units charged to production:
Inventory in process, September 1	400
Received from Smelting Department	9320
Total units accounted for by the Rolling Department	9720
Units to be assigned costs:
Inventory in process, September 1	400	0	280
Started and completed in September (9320-700)	8620	8620	8620
Transferred to Finished goods in September	9020	8620	8900
Inventory in process, September 30	700	700	630
Total units to be assigned costs	9720	9320	9530
COSTS	Costs
Direct Materials	Conversion	Total
Cost per equivalent unit:
Total costs for September in Rolling Department	$29,824	$13,342
/Total equivalent units	9320	9530
Cost per equivalent unit	$3.20	$1.40	$4.60
Costs assigned to production:
Inventory in process, September 1			$1,396
Costs incurred in September			$43,166
Total costs accounted for by the Rolling Department			$44,562
Costs allocated to completed and partially completed units:
Inventory in process, September 1-balance			$1,396
To complete inventory in process, September 1	$0	$392	$392
Cost of completed September 1 work in process			$1,788
Started and completed in September	$27,584	$12,068	$39,652
Transferred to Finished goods in September			$41,440
Inventory in process, September 30	$2,240	$882	$3,122
Total costs assigned by the Rolling Department			$44,562

Solution 2:
Account	Work in Pocess- Rolling Department
				Balance
Date	Item	Debit	Credit	Debit	Credit
01-Oct	Balance			$3,122
31-Oct	Smelting department	$36,380		$39,502
31-Oct	Direct labor	$10,720		$50,222
31-Oct	Factory Overhead	$5,765		$55,987
31-Oct	Finished Goods		$53,819	$2,168
31-Oct	Ending Balance			$2,168

Pittsburgh Aluminum Company.
Cost of Production Report-Rolling Department
For the Month Ended October 31
UNITS	Whole Units	Equivalent Units
Direct Materials	Conversion
Units charged to production:
Inventory in process, October 1	700
Received from Smelting Department	10700
Total units accounted for by the Rolling Department	11400
Units to be assigned costs:
Inventory in process, October 1	700	0	70
Started and completed in October (10700-500)	10200	10200	10200
Transferred to Finished goods in October	10900	10200	10270
Inventory in process, October 31	500	500	300
Total units to be assigned costs	11400	10700	10570
COSTS	Costs
Direct Materials	Conversion	Total
Cost per equivalent unit:
Total costs for October in Rolling Department	$36,380	$16,485
/Total equivalent units	10700	10570
Cost per equivalent unit	$3.40	$1.56	$4.96
Costs assigned to production:
Inventory in process, October 1			$3,122
Costs incurred in October			$52,865
Total costs accounted for by the Rolling Department			$55,987
Costs allocated to completed and partially completed units:
Inventory in process, October 1-balance			$3,122
To complete inventory in process, October 1	$0	$109	$109
Cost of completed October 1 work in process			$3,231
Started and completed in October	$34,680	$15,908	$50,588
Transferred to Finished goods in October			$53,819
Inventory in process, October 31	$1,700	$468	$2,168
Total costs assigned by the Rolling Department			$55,987