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

(1,800 units, 80% completed):

Direct materials (1,800 x $14.6)$26,280

Conversion (1,800 x 80% x $9.5)13,680

$39,960

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

Direct materials transferred from Reaction

Department: 23,200 units at $14.4 a unit$334,080

Direct labor115,560

Factory overhead111,032

During January, 23,000 units of specialty chemicals were completed. Work in Process—Filling Department on January 31 was 2,000 units, 90% 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 UnitsDirect MaterialsConversion

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 costs

Cost Information

Cost per equivalent unit:

Direct MaterialsConversion

Total costs for January in Filling Department$$

Total equivalent units

Cost per equivalent unit$$

Costs assigned to production:

Direct MaterialsConversionTotal

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. If an amount box does not require an entry, leave it blank.

(1)

(2)

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.

Increase or DecreaseAmount

Change in direct materials cost per equivalent unit $

Change in conversion cost per equivalent unit $

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   and  . 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
UNITS	Whole Units	Equivalent Units
Direct Materials	Conversion
Units charged to production:
Inventory in process, January 1	1800
Received from Reaction Department	23200
Total units accounted for by the Filling Department	25000
Units to be assigned costs:
Inventory in process, January 1 (20% completed this period)	1800	0	360
Started and completed in January (23000-1800)	21200	21200	21200
Transferred to Finished goods in January	23000	21200	21560
Inventory in process, January 31 (90% completed)	2000	2000	1800
Total units to be assigned costs	25000	23200	23360
COSTS	Costs
Direct Materials	Conversion	Total
Cost per equivalent unit:
Total costs for January in Filling Department	$3,34,080	$2,26,592
/Total equivalent units	23200	23360
Cost per equivalent unit	$14.40	$9.70	$24.10
Costs assigned to production:
Inventory in process, january 1			$39,960
Costs incurred in January			$5,60,672
Total costs accounted for by the Filling Department			$6,00,632
Costs allocated to completed and partially completed units:
Inventory in process, January 1-balance			$39,960
To complete inventory in process, January 1 (Equi. Units*cost per Equi. Unit)	$0	$3,492	$3,492
Cost of completed January 1 work in process			$43,452
Started and completed in January	$3,05,280	$2,05,640	$5,10,920
Transferred to Finished goods in January			$5,54,372
Inventory in process, January 31	$28,800	$17,460	$46,260
Total costs assigned by the Filling Department			$6,00,632

2.

Journal Entries - White Diamond Flour Company
Date	Particulars	Debit	Credit
31-Jan	Work In Process - Filling Department Dr	$3,34,080
	To Work In Process - Reaction Department		$3,34,080
	(Being cost transferred from Reaction to Filling department)
31-Jan	Finished Goods inventory Dr	$5,54,372
	To Work In Process - Filling Department		$5,54,372
	(Being cost transferred from Filling to Finished goods)

3.

	Increase/(Decrease)	Amount
Direct Materials ($14.40-$14.60)	Decrease	$0.20
Conversion ($9.70-$9.50)	Increase	$0.40

4.

The cost of production report may be used as the basis for allocating production costs between units completed and transferred out and Units in ending work in process. 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 difference in unit product costs from one month to another, such as those in part (3), can be studied carefully and any significant differences investigated.