Question

Cost of Production Report

The debits to Work in Process—Roasting Department for Morning Brew Coffee Company for August, together with information concerning production, are as follows:

Work in process, August 1, 400 pounds, 30% completed				$1,160*
	*Direct materials (400 X $2.6)	$1,040
	Conversion (400 X 30% X $1)	$120
		$1,160
Coffee beans added during August, 13,000 pounds				33,150
Conversion costs during August				14,069
Work in process, August 31, 700 pounds, 30% completed				?
Goods finished during August, 12,700 pounds				?

All direct materials are placed in process at the beginning of production.

a. Prepare a cost of production report, presenting the following computations:

1. Direct materials and conversion equivalent units of production for August
2. Direct materials and conversion costs per equivalent unit for August
3. Cost of goods finished during August
4. Cost of work in process at August 31

If an amount is zero, enter in "0". For the cost per equivalent unit, round your answer to two decimal places.

Morning Brew Coffee Company
Cost of Production Report-Roasting Department
For the Month Ended August 31
Unit Information
Units charged to production:
Inventory in process, August 1
Received from materials storeroom
Total units accounted for by the Roasting Department
Units to be assigned costs:
		Equivalent Units
	Whole Units	Direct Materials (1)	Conversion (1)
Inventory in process, August 1
Started and completed in August
Transferred to finished goods in August
Inventory in process, August 31
Total units to be assigned costs
Cost Information
Costs per equivalent unit:
		Direct Materials	Conversion
Total costs for August in Roasting Department		$	$
Total equivalent units
Cost per equivalent unit (2)		$	$
Costs assigned to production:
	Direct Materials	Conversion	Total
Inventory in process, August 1			$
Costs incurred in August
Total costs accounted for by the Roasting Department			$
Costs allocated to completed and partially completed units:
Inventory in process, August 1 balance			$
To complete inventory in process, August 1	$	$
Cost of completed August 1 work in process			$
Started and completed in August
Transferred to finished goods in August (3)			$
Inventory in process, August 31 (4)
Total costs assigned by the Roasting Department			$

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

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

Answer 1

Answer:

a-1

Unit information
Units charged to production
Inventory in process, August 1	400
Received from material storeroom	13,000
Total units accounted for by the Roasting department	13,400
	Whole units	Percentage added	Direct materials	Percentage added	Conversion
Inventory in process, August 1	400	0%	-	70%	280
Started and completed in august	12,300	100%	12,300	100%	12,300
Transferred to finished goods	12,700		12,300		12,580
Inventory in process, August 31	700		700	30%	210
Total units to be assigned costs	13,400		13,000		12,790

a-2

COSTS	Direct Material	Conversion
Total costs for August in Roasting department	33,150	14,069
Total equivalent units	13,000	12,790
Cost per equivalent unit	2.55	1.1

a-3,a-4

COSTS	Direct materials	Conversion	Total
Inventory in process, August 1			1,160
Costs incurred in August			47,219
Total costs accounted for by the Roasting Department			48,379
Cost allocated to completed and partially completed units
Inventory in process, August 1			1,160
To complete inventory in process, August 1		308	308
Cost of completed August 1 work in process			1,468
Started and completed in August	31,365	13,530	44,895
Tranferred to finished Goods in August	-	-	46,363
Inventory in process, August 31	1,785	231	2,016
Total costs assigned by the Roasting Department			48,379

b.

Change in direct materials cost per equivalent unit	Decrease	0.05
Change in conversion cost per equivalent unit	Increase	0.10

CALCULATION:

a-1

Here, we need to calculate the units started and completed, for that we need to then deduct the units in process ending from the units added during August.

Units Started and Completed = Units Added During August − In Process Ending = 13,000 − 700 = 12,300

Then we need to calculate the equivalent units of direct materials, for that we need to multiply the in process beginning, started and completed, and in process ending units by the percentage of materials added for each.

Equivalent Units Added of Direct Materials = (In Process Beginning Units x Percentage) + (Started and Completed x Percentage) + (In Process Ending Units x Percentage)

= (400 x 0) + (12,300 x 100%) + (700 x 100%) = 0 + 12,300 + 700 = 13,000

Nex step is to calculate the equivalent units of conversion cost. To do that we need to multiply the in process beginning, started and completed, and in process ending units with the percentage of conversion cost added for each.

Equivalent Units Added of Conversion Cost = (In Process Beginning Units x Percentage) + (Started and Completed x Percent) + (In Process Ending Units x Percent)

= (400 x 70%) + (12,300 x 100%) + (700 x 30%) = 280 + 12,300 + 210 = 12,790

Unit information
Units charged to production
Inventory in process, August 1	400
Received from material storeroom	13,000
Total units accounted for by the Roasting department	13,400
	Whole units	Percentage added	Direct materials	Percentage added	Conversion
Inventory in process, August 1	400	0%	-	70%	280
Started and completed in august	12,300	100%	12,300	100%	12,300
Transferred to finished goods	12,700		12,300		12,580
Inventory in process, August 31	700		700	30%	210
Total units to be assigned costs	13,400		13,000		12,790

a-2

Here, we need to calculate the cost per equivalent unit by dividing the total cost for August by the total equivalent for direct materials.

Cost Per Equivalent Unit = Total Equivalent For Direct Materials / Total Cost For August

= $33,150  / 13,000 = $2.55

Then, we need to calculate the cost per equivalent unit by dividing the total cost for August by the total equivalent for conversion cost.

Cost Per Equivalent Unit = Total Equivalent Cost / Total Cost For August = $14,069/12,790 = 1.10

COSTS	Direct Material	Conversion
Total costs for August in Roasting department	33150	14069
Total equivalent units	13000	12790
Cost per equivalent unit	2.55	1.1

a-3

Here, we need to calculate the total cost of the inventory in process. It is calculated by adding the cost from the previous month and the additional cost incurred this month.

The cost added in current month is calculated by multiplying the cost per equivalent unit by the equivalent units in process.

Total Cost of In Process Beginning = Cost Incurred Last Month + Cost Added This Month = $1,160 + ($1.10 x 280) = $1,160 + $308 = $1,468

Then, we need to calculate the total cost of the started and completed units. It is calculated by multiplying the equivalent units with cost per equivalent unit.

Total Cost Started and Completed = (Equivalent Units x Cost per Equivalent Unit of Materials) + (Equivalent Units x Cost per Equivalent Unit of Conversion)

= (12,300 x $2.55) + (12,300 x $1.10) = $31,365 + $13,530 = $44,895

And then we need to calculate the total cost of finished goods by adding the total cost of in process beginning and the cost of started and completed units.

Total Cost of Finished Goods = Total Cost of In Process Beginning + Total Cost of Started and Completed = $1,468 + $44,895 =$46,363

COSTS	Direct materials	Conversion	Total
Inventory in process, August 1			1,160
Costs incurred in August			47,219
Total costs accounted for by the Roasting Department			48,379
Cost allocated to completed and partially completed units
Inventory in process, August 1			1,160
To complete inventory in process, August 1		308	308
Cost of completed August 1 work in process			1,468
Started and completed in August	31,365	13,530	44,895
Tranferred to finished Goods in August	-	-	46,363

a-4

Here, we need to calculate the total cost of direct materials for in process ending units. For that we need to multiply the equivalent units by cost per equivalent unit of direct materials.

Direct Cost = Equivalent Units × Cost Per Equivalent Unit of Materials = 400 × $4.60 = $1,785

Then, we need to find the total cost of conversion for in process ending units. For that we need to multiply the equivalent units by cost per equivalent unit of conversion

Conversion Cost = Equivalent Units × Cost Per Equivalent Unit of Conversion = 168 × $1.50 = $230

Then, we need to add the total cost of direct materials and total cost of conversion to get the in process ending cost.

In Process Ending Cost = Total Direct Materials Cost + Total Conversion Cost = $1,785 + $230 = $2,016

Units charged to production	Direct materials	Conversion	Total
Inventory in process, ending equivalent unit	700	210
Cost per equivalent unit	2.55	1.10
Total cost of in process ending	1,785	231	2,016

b.