Question

Hana Coffee Company roasts and packs coffee beans. The process begins by placing coffee beans into the Roasting Department. From the Roasting Department, coffee beans are then transferred to the Packing Department. The following is a partial work in process account of the Roasting Department at July 31:

ACCOUNT Work in Process—Roasting Department							ACCOUNT NO.
Date		Item	Debit		Credit		Balance
							Debit		Credit
July	1	Bal., 30,000 units, 10% completed					121,800
	31	Direct materials, 155,000 units	620,000				741,800
	31	Direct labor	90,000				831,800
	31	Factory overhead	33,272				865,072
	31	Goods transferred, 149,000 units			?
	31	Bal., ? units, 45% completed					?

Required:

1. Prepare a cost of production report, and identify the missing amounts for Work in Process—Roasting Department. If an amount is zero, enter "0". When computing cost per equivalent units, round to the nearest cent.

Hana Coffee Company
Cost of Production Report-Roasting Department
For the Month Ended July 31
Unit Information
Units charged to production:
Inventory in process, July 1
Received from materials storeroom
Total units accounted for by the Roasting Department
Units to be assigned costs:
		Equivalent Units
	Whole Units	Direct Materials	Conversion
Inventory in process, July 1
Started and completed in July
Transferred to Packing Department in July
Inventory in process, July 31
Total units to be assigned costs
Cost Information
Cost per equivalent unit:
		Direct Materials	Conversion
Total costs for July in Roasting Department		$	$
Total equivalent units
Cost per equivalent unit		$	$
Costs assigned to production:
	Direct Materials	Conversion	Total
Inventory in process, July 1			$
Costs incurred in July
Total costs accounted for by the Roasting Department			$
Costs allocated to completed and partially completed units:
Inventory in process, July 1 balance			$
To complete inventory in process, July 1	$	$
Cost of completed July 1 work in process			$
Started and completed in July
Transferred to Packing Department in July			$
Inventory in process, July 31
Total costs assigned by the Roasting Department			$

Feedback

1. Calculate equivalent units for materials and conversion costs. Calculate the cost per equivalent unit for materials and conversion costs. Calculate the costs assigned to the beginning inventory, the units started and completed, and the ending inventory.

2. Assuming that the July 1 work in process inventory includes $119,400 of direct materials, determine the increase or decrease in the cost per equivalent unit for direct materials and conversion between June and July. If required, round your answers to two decimal places.

	Increase or Decrease	Amount
Change in direct materials cost per equivalent unit		$
Change in conversion cost per equivalent unit		$

Answer 1

Solution 1:

Hana Coffee
Roasting Department
Computation of Equivalent unit (FIFO)
Particulars	Physical units	Material	Conversion
Units to be accounted for:
Beginning WIP Inventory	30000
Units started this period	155000
Total unit to be accounted for	185000
Units Accounted for:
Units completed and transferred out
From beginning inventory Material - 0% Conversion - 90%	30000	0	27000
Started and completed currently	119000	119000	119000
Units in ending WIP Material - 100% Conversion - 45%	36000	36000	16200
Total units accounted for	185000	155000	162200

Hana Coffee
Roasting Department
Computation of Cost per Equivalent unit
Particulars	Total cost	Material	Conversion
Current period cost	$743,272.00	$620,000.00	$123,272.00
Equivalent units		155000	162200
Cost per equivalent unit		$4.00	$0.76

Hana Coffee
Roasting Department
Producton cost report - FIFO
Particulars	Total cost	Material	Conversion
Cost Accounted for :
Cost assigned to unit transferred out:
Cost from beginning WIP Inventory	$121,800
Current cost added to complete beginning WIP:
Material	$0	$0
Conversion (27000 * $0.76)	$20,520		$20,520
Total Cost from beginning inventory	$142,320
Current cost of unit started and completed:
Material (119000*$4)	$476,000	$476,000
Conversion (119000*$0.76)	$90,440		$90,440
Total cost of unit started and completed	$566,440
Total cost of unit transferred out	$708,760
Cost assigned to ending WIP:
Material (36000*$4)	$144,000	$144,000
Conversion (16200*$0.76)	$12,312		$12,312
Total ending WIP inventory	156,312
Total cost accounted for	$865,072

Solution 2:

Change in direct materials cost per equivalent unit form June to July = $4 - ($119,400 / 30000) = $0.02 increase

Change in conversion cost per equivalent unit = $0.76 - ($2,400 / 3000) = $0.04 decrease