Question

Lacy, inc., produces a subassembly used in the productin of hydraulic cylinders. The subassemblies are produced in three departments: Plate cutting, rod cutting, and welding. Materiasl are added at the beginning of the process. OVerhead is applied using the ofllowing drivers and activity rates:

Driver Rate acutal usage (by plate cutting)

direct labor cost 150% of direct labor 732,000

inspection cost $40 per hour 7450 hours

purchase orders $1000 per order 800 orders

other data for the plate cutting deparment are as follows:

beginning work in process ------

units started 750000

direct materials cost 6000000

units ending work in process (100% materials; 64% conversion) 50000

calculate equivalent units of prodcution for direct materials and conversion costs

provide the following information: the total cost of units transferred out

the journal entry for transferring costs form plate cutting to welding

the cost assigned to unis ending inventory

Answer 1

Overheads applied:
Labour cost (732000*150%)			1098000
Inspection (7450*40)			298000
Purchase orders (1000*800)			800000
Total Overheads cost			2196000
Add: Direct labouur cost			732000
Conversion cost			2928000
UNITS TO ACCOUNT FOR:
Beginning Work in Process units				0
Add: Units Started in Process				750,000
Total Units to account for:				750,000
UNITS TO BE ACCOUNTED FOR:
Units started and completed				700,000
Ending Work in Process				50,000
Total Units to be accounted for:				750,000
Equivalent Units:
			Material Cost		Conversion
			% Completion	Units	% Completion	Units
Units started and completed			100%	700,000	100%	700,000
Ending Work in Process			100%	50,000	60%	30,000
Total Equivalent units				750,000		730,000
COST PER EQUIVALENT UNIT:
			Material		Conversion
Total cost added during the year			6,000,000		2,928,000
Equivalent Units			750,000		730,000
Cost per Equivalent unit			8		4.01
TOTAL COST ACCOUNTED FOR:
Units started and Transferred out (700000 units)
			Equivalent unit	Cost per EU	Total Cost
Material			700,000	8	5600000
Conversion Cost			700,000	4.01	2807000
Total Cost of Units completed and transferred out:					8407000
Ending Work in process (50000 units)
			Equivalent unit	Cost per EU	Total Cost
Material			50,000	8	400000
Conversison Cost			30,000	4.01	120300
Total cost of Ending Work in process:					520,300
Journal entry:
Work in process Inventory-Welding Dr.				8407000
Work in process Inventory-Plate cutting					8407000