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
(3,100 units, 60% completed):
	Direct materials (3,100 x $18.1)	$56,110
	Conversion (3,100 x 60% x $11.7)	21,762
		$77,872

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

Direct materials transferred from Reaction
	Department: 40,000 units at $17.8 a unit	$712,000
Direct labor		250,310
Factory overhead		240,490

During January, 39,700 units of specialty chemicals were completed. Work in Process—Filling Department on January 31 was 3,400 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 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 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)
(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 Decrease	Amount
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.

	Physical units	Materials	Conversion
Work in Process Beginning	3100
Started during the period	40000
Total Units to account for	43100
Work in Process Beginning	3100	0	1240
Units started and completed	36600	36600	36600
Units transferred to next department	39700	36600	37840
Ending Work in Process :	3400	3400	3060
Total Units Accounted for	43100
Equivalent units		40000	40900
	Materials	Conversion	Total
Cost added during the period	$        712,000	$        490,800	$        1,202,800
Equivalent units of Production	40000	40900
Cost per equivalent unit	$            17.80	$            12.00	$               29.80
Costs to be accounted for
	Materials	Conversion	Total
Work in Process, February 1	$          56,110	$          77,872	$           133,982
Cost added during the period	$        712,000	$        490,800	$        1,202,800
Total Costs	$       768,110	$       568,672	$       1,336,782
Costs accounted for
	Materials	Conversion	Total
Units Completed and transferred out
Cost of Beginning Work in Process	$          56,110	$          77,872	$           133,982
Cost of work on Beginning Work in Process	$                   -	$          14,880	$             14,880
Total Cost of Beginning WIP	$          56,110	$          92,752	$           148,862
Units started and completed	36600	36600
Cost per equivalent unit	$            17.80	$            12.00
Cost of units started and completed	$       651,480	$       439,200	$       1,090,680
Cost of units transferred out	$       707,590	$       531,952	$       1,239,542
	Materials	Conversion	Total
Ending work in Process Inventory
Equivalent units of Production	3400	3060
Cost per equivalent unit	$            17.80	$            12.00
Cost of Ending work in Process Inventory	$          60,520	$          36,720	$             97,240
Total Costs accounted for			$       1,336,782

2.

Account Titles	Debit	Credit
Work in Process - Filling	$        712,000
Work in Process - Reaction		$        712,000
Finished Goods	$    1,239,542
Work in Process - Filling		$    1,239,542

3.
Change in direct materials cost per equivalent unit - Decrease by $0.30 per unit
Change in conversion cost per equivalent unit - Increase by $0.30 per unit

4.
The cost of production report may be used as the basis for allocating product costs between Work in Process and Transferred out goods.