Question

Equivalent Units and Related Costs; Cost of Production Report; Entries

Dover Chemical Company manufactures specialty chemicals by a series of three processes, all materials being introduced in the Distilling Department. From the Distilling Department, the materials pass through the Reaction and Filling departments, emerging as finished chemicals.

The balance in the account Work in Process—Filling was as follows on January 1:

Work in Process—Filling Department
(5,900 units, 70% completed):
	Direct materials (5,900 x $13.4)	$79,060
	Conversion (5,900 x 70% x $8.6)	35,518
		$114,578

The following costs were charged to Work in Process—Filling during January:

Direct materials transferred from Reaction
	Department: 76,100 units at $13.1 a unit	$996,910
Direct labor		331,710
Factory overhead		318,698

During January, 75,400 units of specialty chemicals were completed. Work in Process—Filling Department on January 31 was 6,600 units, 40% completed.

Required:

1. Prepare a cost of production report for the Filling Department for January. If an amount is zero, enter "0". If required, round your cost per equivalent unit answers to two decimal places.

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

2. Journalize the entries for (1) costs transferred from Reaction to Filling and (2) the cost transferred from Filling to Finished Goods.

(1)
(2)

3. Determine the increase or decrease in the cost per equivalent unit from December to January for direct materials and conversion costs. 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		$

4. Discuss the uses of the cost of production report and the results of part (3).

The cost of production report may be used as the basis for allocating product costs between   and  . The report can also be used to control costs by holding each department head responsible for the units entering production and the costs incurred in the department. Any differences in unit product costs from one month to another, such as those in part (3), can be studied carefully and any significant differences investigated.

Answer 1

1.

Dover Chemical Company
Cost of Production Report-Filling Department
For the Month Ended January 31
UNITS	Whole Units	Equivalent Units
Direct Materials	Conversion
Units charged to production:
Inventory in process, January 1	5900
Received from Reaction Department	76100
Total units accounted for by the Filling Department	82000
Units to be assigned costs:
Inventory in process, January 1 (80% completed this period)	5900	0	1770
Started and completed in January (75400-5900)	69500	69500	69500
Transferred to Finished goods in January	75400	69500	71270
Inventory in process, January 31 (90% completed)	6600	6600	2640
Total units to be assigned costs	82000	76100	73910
COSTS	Costs
Direct Materials	Conversion	Total
Cost per equivalent unit:
Total costs for January in Filling Department	$9,96,910	$6,50,408
/Total equivalent units	76100	73910
Cost per equivalent unit	$13.10	$8.80	$21.90
Costs assigned to production:
Inventory in process, january 1			$1,14,578
Costs incurred in January			$16,47,318
Total costs accounted for by the Filling Department			$17,61,896
Costs allocated to completed and partially completed units:
Inventory in process, January 1-balance			$1,14,578
To complete inventory in process, January 1 (Equi. Units*cost per Equi. Unit)	$0	$15,576	$15,576
Cost of completed January 1 work in process			$1,30,154
Started and completed in January	$9,10,450	$6,11,600	$15,22,050
Transferred to Finished goods in January			$16,52,204
Inventory in process, January 31	$86,460	$23,232	$1,09,692
Total costs assigned by the Filling Department			$17,61,896

2.

Date	Particulars	Debit	Credit
31-Jan	Work In Process - Filling Department Dr	$9,96,910
	To Work In Process - Reaction Department		$9,96,910
	(Being cost transferred from Reaction to Filling department)
31-Jan	Finished Goods inventory Dr	$16,52,204
	To Work In Process - Filling Department		$16,52,204
	(Being cost transferred from Filling to Finished goods)

3.

	Increase/(Decrease)	Amount
Direct Materials ($13.10-$13.40)	Decrease	$0.30
Conversion ($8.80-$8.60)	Increase	$0.20

4.

The cost of production report may be used as the basis for allocating production costs between units completed and transferred out and Units in ending work in process. The report can also be used to control costs by holding each department head responsible for the units entering production and the costs incurred in the department. Any difference in unit product costs from one month to another, such as those in part (3), can be studied carefully and any significant differences investigated.