Question

In: Accounting

Intense Co. manufactures a product that uses two production departments. Units are begun in the Mixing...

Intense Co. manufactures a product that uses two production departments. Units are begun in the Mixing Department and then transferred to the Finishing Department.

Below is information related to Intense Co.’s Mixing Department during the current period:

·       The Mixing Department began the period with 50,000 units of beginning inventory, costing $225,000.

The $225,000 consisted of $90,000 of materials cost and $135,000 of conversion costs.

The units in beginning inventory were 40% complete with regard to materials and 50% complete with regard to conversion costs.

·       During the period an additional 300,000 units were started in the Mixing Department.

·       Costs added to production during the period consisted of $785,000 of materials and $560,000 of conversion costs.

·       As of the end of the period, 10,000 units were still unfinished and in work in process. The units were 70% complete with regard to materials and 20% complete with regard to conversion costs.

For the Intense Company Mixing Department:

A. Compute the number of units transferred to the Finishing Department.

B. Use the weighted average method to compute equivalent units of production for materials and for conversion.   

C. Compute the cost per equivalent unit for materials and for conversion that Intense Company will use to assign costs to units of production.                    

D. Assign costs to units transferred to the Finishing Department and units in ending inventory.

E. Prepare a Cost Reconciliation Report for the Mixing Department.          

F. Prepare the journal entry to record the cost of the units transferred out of the Mixing Department and into the Finishing Department.

Solutions

Expert Solution

A) Computation of Units transferred to Finishing department:

Particulars Units Explanation
Opening Units 50000 Opening units
Current year Addition 300000
Less: Inventory in Progress (10000) Units in progress.
Total units transferred 310000

B) Equivalent units completion for Material and Conversion Cost:

Particulars Total Units(A) % Material completion (B)

Material equivalent units

(C)=(A)*(B)

 % Labour completion (D) Material equivalent units (E)=(A)*(D)
Opening 50000 60 30000 50 25000
Addition (100% completion) 290000 100 290000 100 290000
Closing 10000 70 7000 20 2000
Total 327000 317000

C) Computation of cost per unit for material and conversion cost

Particulars Material cost Conversion cost Remarks
Opening 54000 67500 Considered only for this year (Like 90000 * 60%)
Addition 785000 560000
Less Closing Cost (7850) (14933) (785000/300000)*10000 units*30
Total Cost (A) 831150 612567
Equivalent units (B) 327000 317000
Cost per unit (A/B) 2.54 1.93

D) Assignment of Cost to Finished goods and to Closing Inventory

Particulars Material cost Conversion Cost Remarks
Total Cost (A) 839000 627500 ( Opening Proportion and current year)
Assignment of cost (B) 831150 612567 (327000*2.54) (317000 *1.93)
Balance Closing cost (A)- (B) 7850 14933

E) Cost Reconcilliation report

Particulars Amount Remarks
Opening Cost 121500 (54000+67500)
+Addition of Cost in current year 1345000 (785000+560000)
-Assignment of Cost to Finishing department 1443717 (831150+612567)
= Closing WIP cost 22783

F) Journal entry for transfer of cost to Finishing Department

WIP Finishing Department Account Debit $ 1443717

To WIP Mixing Department Account $1443717

ekkarill92 answered 1 year ago
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