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

Jan 1 bal . $0.00
Transfer from Moulding 20,000 . $1,310,000
Direct Materials Added $391,600
Direct Labour $638,000 Manufacturing Overhead $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 (3 marks

(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. (2

Answer 1