Question

1. Hudson Dock Company manufactures boat docks on an assembly line. Its standard costing system uses two costs categories, direct materials and conversion costs. Each tractor must pass through the Assembly Department and the Finishing Department. Direct materials are added at the beginning of the production process. Conversion costs are allocated evenly throughout production.

Data for the Assembly Department for May 20X5 are:
Work in process, beginning inventory	70 units
Direct materials (100% complete)
Conversion costs (25% complete)
Units started during May	40 units
Work in process, ending inventory	10 units
Direct materials (100% complete)
Conversion costs (50% complete)
Costs for May
Standard costs for Assembly:
Direct materials	$4,000 per unit
Conversion costs	$16,000 per unit
Work in process beginning inventory:
Direct materials	$140,000
Conversion costs	$260,000

a. Which of the following journal entries properly records the assignment of conversion costs to work-in-process inventory and the conversion-cost variances of the Assembly Department, assuming that conversion costs are 20% higher than expected?

b. Which of the following journal entries properly records the Assembly Department’s actual conversion costs for the month, assuming that conversion costs are 20% higher than expected?

c. Which of the following journal entries properly records direct materials requisitions for the work-in-process inventory and direct materials variances, assuming that the Assembly Department used 10% less materials than expected?

Answer 1

Answer a.

Work in Process – Assembly Department	1,400,000
Assembly Department Conversion Costs Allocated		1,400,000
Assembly Department Conversion Costs Allocated	1,400,000
Conversion – Cost Variances	280,000
Assembly Department Conversion Costs Control		1,680,000

Answer b.

Assembly Department Conversion Cost Control	1680000
Various accounts		1680000
Workings:
To complete Work in process, beginning	840000	=70*(1-25%)*16000
Units started and completed	480000	=(40-10)*16000
Work in process, ending	80000	=10*50%*16000
Budgeted conversion costs	1400000
Actual conversion costs	1680000	=1400000*1.20

Answer c.

Work-in-Process – Assembly Department	160000
Direct Materials Variances		16000
Assembly Department Materials Cost Control		144000
Workings:
Budgeted Direct Materials	160000	=40*4000
Actual direct materials cost	144000	=160000*(1-10%)