Question

The Cutting Department of Karachi Carpet Company provides the following data for January. Assume that all materials are added at the beginning of the process.

Work in process, January 1, 10,200 units, 60% completed		$118,524*
*Direct materials (10,200 × $9.4)	$95,880
Conversion (10,200 × 60% × $3.7)	22,644
	$118,524
Materials added during January from Weaving Department, 157,200 units		$1,485,540
Direct labor for January		264,298
Factory overhead for January		323,030
Goods finished during January (includes goods in process, January 1), 159,000 units		—
Work in process, January 31, 8,400 units, 20% completed		—

a. Prepare a cost of production report for the Cutting Department. If an amount is zero or a blank, enter in "0". For the cost per equivalent unit computations, round your answers to two decimal places.

Karachi Carpet Company
Cost of Production Report-Cutting Department
For the Month Ended January 31
Unit Information
Units charged to production:
Inventory in process, January 1
Received from Weaving Department
Total units accounted for by the Cutting 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 cost
Cost Information
Cost per equivalent unit:
		Direct Materials	Conversion
Total costs for January in Cutting 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 Cutting 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 Cutting Department			$

Feedback

a. How much more (percentage amount) needed to be done to the beginning work in process units to make the units to complete to transfer to the next department? Did these units require more material cost or more conversion cost? How much, in terms of cost, had been done to these units in the prior period? In order for units to be transferred to the next department, the units have to be complete with respect to both materials and conversion. When are materials added in the process? How complete are the units in ending inventory with respect to materials? How compete are the units in ending inventory with respect to conversion? Materials and conversion cost needs to be allocated among the equivalent units. Are the number of equivalent units the same for materials and conversion?

b. Compute and evaluate the change in cost per equivalent unit for direct materials and conversion from the previous month (December). If required, round your answers to two decimal places.

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

Answer 1

Karachi Carpet Company
Cost of Production Report-Cutting Department
For the Month Ended January 31
Unit Information
Units charged to production:
Inventory in process, January 1			10200
Received from Weaving Department			157200
Total units accounted for by the Cutting Department			167400
Units to be assigned costs:
		Equivalent Units
	Whole Units	Direct Materials	Conversion
Inventory in process, January 1	10200	0	4080
Started and completed in January	148800	148800	148800
Transferred to finished goods in January	159000	148800	152880
Inventory in process, January 31	8400	8400	1680
Total units to be assigned costs	167400	157200	154560
Cost Information
Costs per equivalent unit:
		Direct Materials	Conversion
Total costs for January in Cutting Department		1485540	587328
Total equivalent units		157200	154560
Cost per equivalent unit		9.45	3.80
Costs charged to production:
	Direct Materials	Conversion	Total
Inventory in process, January 1			118524
Costs incurred in January			2072868
Total costs accounted for by the Cutting Department			2191392
Cost allocated to completed and partially completed units:
Inventory in process, January 1 balance			118524
To complete inventory in process, January 1	0	15504	15504
Cost of completed January 1 work in process			134028
Started and completed in January	1406160	565440	1971600
Transferred to finished goods in January			2105628
Inventory in process, January 31	79380	6384	85764
Total costs assigned by the Cutting Department			2191392
2
	Increase or Decrease	Amount
Change in direct materials cost per equivalent unit	Increase	0.05		=9.45-9.40
Change in conversion cost per equivalent unit	Increase	0.10		=3.80-3.70