Question

Equivalent Units and Related Costs; Cost of Production Report; Entries

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
(3,500 units, 20% completed):
	Direct materials (3,500 x $16.7)	$58,450
	Conversion (3,500 x 20% x $10.9)	7,630
		$66,080

The following costs were charged to Work in Process—Filling during January:

Direct materials transferred from Reaction
	Department: 45,200 units at $16.5 a unit	$745,800
Direct labor		258,480
Factory overhead		248,346

During January, 44,800 units of specialty chemicals were completed. Work in Process—Filling Department on January 31 was 3,900 units, 40% completed.

Required:

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
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)	fill in the blank: *Accounts payable * Factory Overhead - Filing Department *Finished Goods * Materials * Work in Process - Filing Department * Work in Process - Reaction Department	fill in the blank
	fill in the blank:		fill in the blank
(2)	fill in the blank: * Cost of goods sold *Factory Overhead - Filing department * Finished Goods * Materials * Work in Process - Filing Department * Work in Process - Reaction Department	fill in the blank
			fill in the blank

	Increase or Decrease	Amount
Change in direct materials cost per equivalent unit
Change in conversion cost per equivalent unit

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.

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 -Direct Materials/Work in Process-? and -Cost of Goods sold/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

1)

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			3500
Received from Reaction Department			45200
Total units accounted for by the Filling Department			48700
Units to be assigned costs:
		Equivalent Units
	Whole Units	Direct Materials	Conversion
Inventory in process, January 1	3500	0	(3500*80%)= 2800
Started and completed in January (44800-3500)	41300	41300	41300
	44800	41300	44100
Inventory in process, January 31	3900	3900	(3900*40%)= 1560
Total units to be assigned costs	48700	45200	45660
Cost Information
Cost per equivalent unit:
		Direct Materials	Conversion
Total costs for January in Filling Department		$745800	(258480+248346)= $506826
Total equivalent units		45200	45660
Cost per equivalent unit		$16.50	$11.10
Costs assigned to production:
	Direct Materials	Conversion	Total
Inventory in process, January 1			$66080
Costs incurred in January (745800+258480+248346)			1252626
Total costs accounted for by the Filling Department			$1318706
Costs allocated to completed and partially completed units:
Inventory in process, January 1 balance			$66080
To complete inventory in process, January 1	$0	(2800*$11.1)= $31080	31080
Cost of completed January 1 work in process			97160
Started and completed in January	(41300*$16.5)= 681450	(41300*$11.1)= 458430	1139880
Transferred to finished goods in January			1237040
Inventory in process, January 31	(3900*$16.5)= 64350	(1560*$11.1)= 17316	81666
Total costs assigned by the Filling Department			$1318706

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 - Filing Department	$745800
	Work in Process - Reaction Department		$745800
	(To record cost transferred from reaction to filling department)
(2)	Finished Goods	$1237040
	Work in Process - Filing Department		$1237040
	(To record cost transferred from filling department to finished goods)

3.

	Increase or Decrease	Amount
Change in direct materials cost per equivalent unit	Decrease	(16.7-16.5)= $0.2
Change in conversion cost per equivalent unit	Increase	(10.9-11.1)= $0.2

4. 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.

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