Question

Dover 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 January 1: Work in Process—Filling Department (3,400 units, 30% completed): Direct materials (3,400 x $18.2) $61,880 Conversion (3,400 x 30% x $11.8) 12,036 $73,916 The following costs were charged to Work in Process—Filling during January: Direct materials transferred from Reaction Department: 43,900 units at $17.9 a unit $785,810 Direct labor 273,870 Factory overhead 263,128 During January, 43,500 units of specialty chemicals were completed. Work in Process—Filling Department on January 31 was 3,800 units, 50% completed.

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

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

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

(1)	Work in Process-Filling Department
	Work in Process-Reaction Department
(2)	Finished Goods
	Work in Process-Filling Department

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?

3. Determine the increase or decrease in the cost per equivalent unit from December to January 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	Decrease	$
Change in conversion cost per equivalent unit	Increase	$

4. Discuss the uses of the cost of production report and the results of part (3).

The cost of production report may be used as the basis for allocating product costs between Work in Process  and Finished Goods . 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

Dover Chemical Company
Filling Department production Report
First in First out (FIFO) Method
For the Month Ended January 31
Summary of Physical units
Units in beginning WIP inventory			3400
Units started during month			43900
Total unit to be accounted for			47300
Units completed and transferred out			43500
Units in ending WIP inventory			3800
Total unit accounted for			47300
Equivalent Units of production
Particulars	Physical units	Direct material		Conversion Cost
		%	units	%	units
units in beginning WIP inventory	3400	0%	0	70%	2380
Units in Started and completed (43500-3400)	40100	100%	40100	100%	40100
units in ending WIP inventory	3800	100%	3800	50%	1900
Equivalent Units of production			43900		44380
Summary of cost to be accounted
	Direct material	Conversion Cost	Total
Cost in beginning WIP	$          61,880	$          12,036	$              73,916
Cost incurred during Month (Add)	$        785,810	$        536,998	$        1,322,808
total cost to be accounted for	$        847,690	$        549,034	$        1,396,724
cost per Equivalent Unit
Cost incurred during Month	785810	536998
Equivalent Units of production	43900	44380
Cost per Equivalent Unit	$            17.90	$            12.10	$                30.00
Assign costs to units transferred out and units in ending WIP inventory
cost assigned to units transferred out
Direct material	61880
Conversion Cost	12036
Cost in beginning WIP		73,916
Direct material (0*17.9)	0
Conversion Cost (2380*12.1)	28798
Cost incurred for complete beginning WIP		28,798
Direct material (40100*17.9)	717790
Conversion Cost (40100*12.1)	485210
Cost of units in Started and completed		1,203,000
cost assigned to units transferred out		1,305,714

Answer in your format

Dover Chemical Company
Cost of Production Report-Filling Department
For the Month Ended January 31
Unit Information
Units charged to production:
Inventory in process, January 1			3,400
Received from Reaction Department			43,900
Total units accounted for by the Filling Department			47,300
Units to be assigned costs:
		Equivalent Units
	Whole Units	Direct Materials	Conversion
Inventory in process, January 1	3,400	-	2,380
Started and completed in January	40,100	40,100	40,100
Transferred to finished goods in January	43,500
Inventory in process, January 31	3,800	3,800	1,900
Total units to be assigned costs		43,900	44,380
Cost Information
Cost per equivalent unit:
		Direct Materials	Conversion
Total costs for January in Filling Department		$     785,810	$        536,998
Total equivalent units		43,900	44,380
Cost per equivalent unit		$        17.90	$            12.10
Costs assigned to production:
	Direct Materials	Conversion	Total
Inventory in process, January 1	$          61,880	$       12,036	$          73,916
Costs incurred in January	$        785,810	$     536,998	$     1,322,808
Total costs accounted for by the Filling Department			$     1,396,724
Costs allocated to completed and partially completed units:
Inventory in process, January 1 balance	$          61,880	$       12,036	$          73,916
To complete inventory in process, January 1	$                -	$       28,798	$          28,798
Cost of completed January 1 work in process	$          61,880	$       40,834	$        102,714
Started and completed in January	$        717,790	$     485,210	$     1,203,000
Transferred to finished goods in January			$     1,305,714
Inventory in process, January 31	$          68,020	$       22,990	$          91,010
Total costs assigned by the Filling Department			$     1,396,724

Journal entries
Date	General journal	Debit	Credit
1	Work in Process-Filling Department	785,810
	Work in Process-Reaction Department		785,810
	(To record costs transferred from Reaction to Filling.)
2	Finished Goods	1,305,714
	Work in Process-Filling Department		1305714
	(To record cost of unit transferred to Finished Goods.)

	Increase or Decrease	Amount
Change in direct materials cost per equivalent unit (18.20-17.90)	Decrease	$          0.30
Change in conversion cost per equivalent unit (12.10-11.80)	Increase	$          0.30

The cost of production report may be used as the basis for allocating product costs between Work in Process and Cost of Transferred out (Here, Finished Goods). 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.