Question

Spectre Chemicals produces Canovic in a two-department process. Information on the two departments for March and April 2016 are as follows:

MARCH 2016:

Department 1: The Company had beginning inventory of 6,000 units, 40% completed with a cost of $45,000. During the month, the department transferred in 22,000 units of the direct materials with a cost of $10 per unit. Ending inventory was 7,000 units, 30% completed. Direct labor is $310,500 and factory overhead is $103,500.

Department 2: The Company had beginning inventory of 5,000 units, 70% completed with a cost of $80,000. During the month, direct labor was $175,000 and factory overhead was $87,500. Ending inventory was 10,000 units, 50% completed.

APRIL 2016:

Department 1: During the month, the department transferred in 20,000 units of the direct materials with a cost of $11 per unit. Direct labor is $209,000 and factory overhead is $104,500. Ending inventory is 10,000 units 60% completed.

Department 2: During the month, direct labor is $175,000 and factory overhead is $87,500. The company had ending inventory of 5,000 units, 70% completed with a cost of $80,000.

Required:

? Compute the Equivalent Units of Production, Material costs, and Conversion costs for each department for March and April 2014.

? Prepare a cost of production report for March and April 2014.

Exuse the complete the chart attached.

Answer 1

Solution:

Spectre Chemicals
Department 1 - For the month of March
Computation of Equivalent unit (FIFO)
Particulars	Physical units	Material	Conversion
Units to be accounted for:
Beginning WIP Inventory	6000
Units started this period	22000
Total unit to be accounted for	28000
Units Accounted for:
Units completed and transferred out
From beginning inventory Material - 0% Conversion - 60%	6000	0	3600
Started and completed currently	15000	15000	15000
Units in ending WIP Material - 100% Conversion - 30%	7000	7000	2100
Total units accounted for	28000	22000	20700

Spectre Chemicals
Department 1 - For the month of March
Computation of Cost per Equivalent unit
Particulars	Total cost	Material	Conversion
Current period cost	$634,000.00	$220,000.00	$414,000.00
Equivalent units		22000	20700
Cost per equivalent unit		$10.00	$20.00

Spectre Chemicals
Department 1 - For the month of March
Producton cost report - FIFO
Particulars	Total cost	Material	Conversion
Cost Accounted for :
Cost assigned to unit transferred out:
Cost from beginning WIP Inventory	$45,000
Current cost added to complete beginning WIP:
Material	$0	$0
Conversion (3600 * $20)	$72,000		$72,000
Total Cost from beginning inventory	$117,000
Current cost of unit started and completed:
Material (15000*$10)	$150,000	$150,000
Conversion (15000*$20)	$300,000		$300,000
Total cost of unit started and completed	$450,000
Total cost of unit transferred out	$567,000
Cost assigned to ending WIP:
Material (7000*$10)	$70,000	$70,000
Conversion (2100*$20)	$42,000		$42,000
Total ending WIP inventory	$112,000
Total cost accounted for	$679,000

Spectre Chemicals
Department 2 - For the month of March
Computation of Equivalent unit (FIFO)
Particulars	Physical units	Transferred In Cost	Conversion
Units to be accounted for:
Beginning WIP Inventory	5000
Units Transferred In	21000
Total unit to be accounted for	26000
Units Accounted for:
Units completed and transferred out
From beginning inventory Transferred In Cost - 0% Conversion - 30%	5000	0	1500
Started and completed currently	11000	11000	11000
Units in ending WIP Tranferred in Cost - 100% Conversion - 50%	10000	10000	5000
Total units accounted for	26000	21000	17500

Spectre Chemicals
Department 2 - For the month of March
Computation of Cost per Equivalent unit
Particulars	Total cost	Transferred In Cost	Conversion
Current period cost	$829,500.00	$567,000.00	$262,500.00
Equivalent units		21000	17500
Cost per equivalent unit		$27.00	$15.00

Spectre Chemicals
Department 2 - For the month of March
Producton cost report - FIFO
Particulars	Total cost	Transferred In Cost	Conversion
Cost Accounted for :
Cost assigned to unit transferred out:
Cost from beginning WIP Inventory	$80,000
Current cost added to complete beginning WIP:
Transferred In Cost	$0	$0
Conversion (1500 * $15)	$22,500		$22,500
Total Cost from beginning inventory	$102,500
Current cost of unit started and completed:
Transferred In Cost (11000*$27)	$297,000	$297,000
Conversion (11000*$15))	$165,000		$165,000
Total cost of unit started and completed	$462,000
Total cost of unit transferred out	$564,500
Cost assigned to ending WIP:
Transferred In Cost (10000*$27)	$270,000	$270,000
Conversion (5000*$15)	$75,000		$75,000
Total ending WIP inventory	$345,000
Total cost accounted for	$909,500

Spectre Chemicals
Department 1 - For the month of April
Computation of Equivalent unit (FIFO)
Particulars	Physical units	Material	Conversion
Units to be accounted for:
Beginning WIP Inventory	7000
Units started this period	20000
Total unit to be accounted for	27000
Units Accounted for:
Units completed and transferred out
From beginning inventory Material - 0% Conversion - 70%	7000	0	4900
Started and completed currently	10000	10000	10000
Units in ending WIP Material - 100% Conversion - 60%	10000	10000	6000
Total units accounted for	27000	20000	20900

Spectre Chemicals
Department 1 - For the month of April
Computation of Cost per Equivalent unit
Particulars	Total cost	Material	Conversion
Current period cost	$533,500.00	$220,000.00	$313,500.00
Equivalent units		20000	20900
Cost per equivalent unit		$11.00	$15.00

Spectre Chemicals
Department 1 - For the month of April
Producton cost report - FIFO
Particulars	Total cost	Material	Conversion
Cost Accounted for :
Cost assigned to unit transferred out:
Cost from beginning WIP Inventory	$112,000
Current cost added to complete beginning WIP:
Material	$0	$0
Conversion (4900 * $15)	$73,500		$73,500
Total Cost from beginning inventory	$185,500
Current cost of unit started and completed:
Material (10000*$11)	$110,000	$110,000
Conversion (10000*$15)	$150,000		$150,000
Total cost of unit started and completed	$260,000
Total cost of unit transferred out	$445,500
Cost assigned to ending WIP:
Material (10000*$11)	$110,000	$110,000
Conversion (6000*$15)	$90,000		$90,000
Total ending WIP inventory	$200,000
Total cost accounted for	$645,500

Spectre Chemicals
Department 2 - For the month of April
Computation of Equivalent unit (FIFO)
Particulars	Physical units	Transferred In Cost	Conversion
Units to be accounted for:
Beginning WIP Inventory	10000
Units Transferred In	17000
Total unit to be accounted for	27000
Units Accounted for:
Units completed and transferred out
From beginning inventory Transferred In Cost - 0% Conversion - 50%	10000	0	5000
Started and completed currently	12000	12000	12000
Units in ending WIP Tranferred in Cost - 100% Conversion - 70%	5000	5000	3500
Total units accounted for	27000	17000	20500

Spectre Chemicals
Department 2 - For the month of April
Computation of Cost per Equivalent unit
Particulars	Total cost	Transferred In Cost	Conversion
Current period cost	$708,000.00	$445,500.00	$262,500.00
Equivalent units		17000	20500
Cost per equivalent unit		$26.21	$12.80

Spectre Chemicals
Department 2 - For the month of April
Producton cost report - FIFO
Particulars	Total cost	Transferred In Cost	Conversion
Cost Accounted for :
Cost assigned to unit transferred out:
Cost from beginning WIP Inventory	$345,000
Current cost added to complete beginning WIP:
Transferred In Cost	$0	$0
Conversion	$64,024		$64,024
Total Cost from beginning inventory	$409,024
Current cost of unit started and completed:
Transferred In Cost	$314,471	$314,471
Conversion	$153,659		$153,659
Total cost of unit started and completed	$468,129
Total cost of unit transferred out	$877,154
Cost assigned to ending WIP:
Transferred In Cost	$131,029	$131,029
Conversion	$44,817		$44,817
Total ending WIP inventory	$175,846
Total cost accounted for	$1,053,000