Question

Cost of Production and Journal Entries

AccuBlade Castings Inc. casts blades for turbine engines. Within the Casting Department, alloy is first melted in a crucible, then poured into molds to produce the castings. On May 1, there were 800 pounds of alloy in process, which were 40% complete as to conversion. The Work in Process balance for these 800 pounds was $118,720, determined as follows:

Direct materials (800 x $140)	$112,000
Conversion (800 x 40% x $21)	6,720
	$118,720

During May, the Casting Department was charged $1,020,000 for 7,500 pounds of alloy and $60,640 for direct labor. Factory overhead is applied to the department at a rate of 150% of direct labor. The department transferred out 7,800 pounds of finished castings to the Machining Department. The May 31 inventory in process was 20% complete as to conversion.

a1. Prepare the May journal entry for the Casting Department for the materials charged to production.

	Work in Process-Casting Department		1020000
	Materials-Alloy		1020000

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a1. Remember there are three different areas of inventory; materials, work in process, and finished goods.

a2. Prepare the May journal entry for the Casting Department for the conversion costs charged to production. If an amount box does not require an entry, leave it blank.

	Work in Process-Casting Department		151600
	Wages Payable		60640
	Factory Overhead-Casting Department		90960

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a2. Remember that a work in process account accumulates all costs (direct materials, direct labor, manufacturing overhead) that are added to the units in a given department. What types of costs are considered conversion costs?

a3. Prepare the May journal entry for the Casting Department for the completed production transferred to the Machining Department.

	Work in Process-Machining Department
	Work in Process-Casting Department

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a3. Are these goods ready for finished goods inventory or do these units need to be transferred to another department first?

b. Determine the Work in Process—Casting Department May 31 balance.
$

c. Compute the change in the costs per equivalent unit for direct materials and conversion from the previous month (April).

	Cost per Equivalent Unit
Change in materials	Decrease	$4
Change in conversion	Decrease	$1

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b. How many units are still in process at the end of the period?

c. Compare the materials and conversion costs per equivalent unit for April and May. The April costs per equivalent unit are determined from the May 1 work in process inventory.

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Answer 1

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AccuBlade Castings Inc.
FIFO method
Workings
Started and completed in same month	Physical Units
Goods finished in the month	7,800.00
Less: Opening work in process	800.00
Started and completed in same month	7,000.00

		Equivalent Units
Units to be assigned costs:	Physical Units	Materials	Conversion
Inventory in process- Beginning	800.00	-	480.00
Started and completed in same month	7,000.00	7,000.00	7,000.00
Transferred to finished goods	7,800.00	7,000.00	7,480.00
Inventory in process- Ending	500.00	500.00	100.00
Total units to be assigned costs:	8,300.00	7,500.00	7,580.00
Costs per equivalent unit	Materials	Conversion	Total
Total costs for the month	1,020,000.00	151,600.00
Total equivalent units	7,500.00	7,580.00
Cost per equivalent unit	136.00	20.00	156.00
Costs assigned to production:	Materials	Conversion	Total
Inventory in process- Beginning	112,000.00	6,720.00	118,720.00
Costs incurred in the month	1,020,000.00	151,600.00	1,171,600.00
Total costs accounted for by the Department			1,290,320.00
Costs allocated to completed and partially completed units
Inventory in process- Beginning			118,720.00
To complete opening inventory in process	-	9,600.00	9,600.00
Cost of opening inventory now completed			128,320.00
Started and completed in same month	952,000.00	140,000.00	1,092,000.00
Transferred to Machining Department			1,220,320.00
Ending Inventory in process	68,000.00	2,000.00	70,000.00	Answer B
Total costs accounted for by the Department			1,290,320.00

Answer a 1
Accounts	Debit $	Credit $
Work in Process- Casting Department	1,020,000.00
Raw materials inventory		1,020,000.00
Answer a 2
Accounts	Debit $	Credit $
Work in Process- Casting Department	151,600.00
Wages		60,640.00
Manufacturing overhead		90,960.00
Answer a 3
Accounts	Debit $	Credit $
Work in Process- Machining Department	1,220,320.00
Work in Process- Casting Department		1,220,320.00
Answer C	Materials	Conversion
Cost of opening inventory	112,000.00	6,720.00
Units	800.00	320.00
Equivalent cost per unit	140.00	21.00
Current equivalent cost per unit	136.00	20.00
Decrease by	4.00	1.00