Question

Arabica Highland 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., 7,000 units, 2/5 completed					24,220
	31	Direct materials, 280,000 units	896,000				920,220
	31	Direct labor	179,600				1,099,820
	31	Factory overhead	44,880				1,144,700
	31	Goods transferred, 281,000 units			?
	31	Bal., ? units, 2/5 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 two decimal places.

Arabica Highland 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
Costs per equivalent unit:
		Direct Materials	Conversion
Total costs for July in Roasting Department		$	$
Total equivalent units
Cost per equivalent unit		$	$
Costs charged to production:
	Direct Materials	Conversion	Total
Inventory in process, July 1			$
Costs incurred in July
Total costs accounted for by the Roasting Department			$
Cost 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			$

2. Assuming that the July 1 work in process inventory includes $21,700 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 the nearest cent.

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

Answer 1

Arabica Highland 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			7000
Received from materials storeroom			280000
Total units accounted for by the Roasting Department			287000
Units to be assigned costs:
		Equivalent Units
	Whole Units	Direct Materials	Conversion
Inventory in process, July 1	7000	0	4200
Started and completed in July	274000	274000	274000
Transferred to Packing Department in July	281000	274000	278200
Inventory in process, July 31	6000	6000	2400
Total units to be assigned costs	287000	280000	280600
Cost Information
Costs per equivalent unit:
		Direct Materials	Conversion
Total costs for July in Roasting Department		896000	224480
Total equivalent units		280000	280600
Cost per equivalent unit		3.2	0.8
Costs charged to production:
	Direct Materials	Conversion	Total
Inventory in process, July 1			24220
Costs incurred in July			1120480
Total costs accounted for by the Roasting Department			1144700
Cost allocated to completed and partially completed units:
Inventory in process, July 1 balance			24220
To complete inventory in process, July 1 (0.80*4200)	0	3360	3360
Cost of completed July 1 work in process			27580
Started and completed in July (274000 Unit)	876800	219200	1096000
Transferred to Packing Department in July			1123580
Inventory in process, July 31	19200	1920	21120
Total costs assigned by the Roasting Department			1144700
	Increase or Decrease	Amount
Change in direct materials cost per equivalent unit**	Increase	0.1
Change in conversion cost per equivalent unit***	Decrease	0.2
**
Material Cost per Equivalent unit for Opening WIP= Cost of Material/No. of Equivalent Unit
= $21700/7000=$3.10
Cos per Equivalent Unit as Claculated in above solution : $3.20
Hence increase in material cost/Eq. Unit will be ($3.20-$3.10)=$0.10
**
Conversion Cost per Equivalent unit for Opening WIP
=(Total Cost - cost of Material )/Equivalent Unit
= ($24220-$21700)/4200=$0.60
Conversion Cost per Equivalent Unit as Claculated in above solution : $0.80
Hence decrease in Conversion lcost/Eq. Unit will be ($0.8-$0.60)=$0.20