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 700 pounds of alloy in process, which were 60% complete as to conversion. The Work in Process balance for these 700 pounds was $102,620, determined as follows:

Direct materials (700 x $140)	$98,000
Conversion (700 x 60% x $11)	4,620
	$102,620

During May, the Casting Department was charged $897,600 for 6,600 pounds of alloy and $26,320 for direct labor. Factory overhead is applied to the department at a rate of 150% of direct labor. The department transferred out 6,800 pounds of finished castings to the Machining Department. The May 31 inventory in process was 40% complete as to conversion.

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

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.

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

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		$
Change in conversion

Answer 1

	General Journal	Debit	Credit
a-1	Work in process-Casting department	$897,600
	Raw material inventory		$897,600
a-2	Work in process-Casting department	$65,800
	Factory wages		$26,320
	Factory overhead ($26,320*150%)		39,480
a-3	Work in process - Machining department	$996,020
	Work in process-Casting department		$996,020

b.

Work in process - Casting department May 31 balance:

Material cost (500*$136)	$68,000
Conversion cost (200*$10)	2,000
Cost of Work in process - Casting department May 31 balance	$70,000

c.

	Cost per equivalent unit
Change in material	Decrease	$4 ($140-136)
Change in conversion	Decrease	$1 ($11-10)

	Equivalent units
		Material		Conversion
	Physical units	%completion	Units	%completion	Units
Beginning work in process	700			40%	280
Units started and completed	6,100	100%	6,100	100%	6,100
Units completed and transferred	6,800
Ending work in process	500	100%	500	40%	200
Total	7,300		6,600		6,580

	Material	Conversion
Cost incurred during May	$897,600	$65,800
Total equivalent units	6,600	6,580
Cost per equivalent unit	$136	$10	$146

Cost of units transferred to machining department:

Cost of beginning work in process:
Beginning balance	$102,620
Further cost incurred (280*$10)	2,800
Cost of beginning work in process (A)	$105,420
Cost of units started and completed (6,100*$146) (B)	$890,600
Total cost of units transferred to machining department (A)+(B)	$996,020