Question

Olomana furniture manufactures file cabinets that are purchased by local businesses. Cabinets are produced in two processing departments, fabricating and assembly. In the fabricating department, all the direct materials are added at the beginning of the process, overhead is applied evenly throughout the entire process and labor is added evenly only during the last 50% of the process. In the assembly department, materials and labor are added evenly throughout the first half of the process, while overhead is applied evenly throughout the entire process. Olomana uses process costing and had the following cost and production information:

                                                                 Fabricating                         Assembly

                                                                 Department                     Department

Direct Materials………………………………………………………………………. $8,850                   $14,863

Direct Labor…………………………………………………………………………….. 19,171                   9,133

Manufacturing Overhead applied…………………………………………….   37,171                 13,255

Units in beginning work in process…………………………………………..   0                           0

Units started during January…………………………………………………….   800                      600

Units completed and transferred out……………………………………….   600                      575

At the end of January, units remaining in work in process in the fabricating department were 40% complete; while units in the ending work in process in the assembly department were 80% complete. During the month, 525 cabinets were sold at an average selling price of $200 each.

Questions (5 points each):

1. Calculate the number of equivalent units produced for each cost strategy in each of the two departments during January.
2. Based on the equivalent units, what were the fabricating cost, assembly costs and total cost of producing a cabinet in January.
3. Prepare the journal entries summarizing the manufacturing costs charged to the fabricating department and the assembly department.
4. Prepare the month-end journal entries to transfer the costs of cabinets moved from the fabricating department to the assembly department and from the assembly department to finished goods inventory.
5. Prepare the entries to record the sales made in January and the corresponding reduction of finished goods inventory.
6. Using T accounts, calculate the ending balances in the work in process accounts, and finished goods inventory.

Answer 1