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
(4,400 units, 40% completed):
	Direct materials (4,400 x $17.7)	$77,880
	Conversion (4,400 x 40% x $11.6)	20,416
		$98,296

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

Direct materials transferred from Reaction
	Department: 56,800 units at $17.5 a unit	$994,000
Direct labor		331,170
Factory overhead		318,184

During January, 56,300 units of specialty chemicals were completed. Work in Process—Filling Department on January 31 was 4,900 units, 10% 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 PRODUCT REPORT - FILLING DEPARTMENT
FOR THE MONTH ENDED JANUARY 31,
	UNIT INFORMATION
A	Units charged to production:
i.	Inventory in Process, Jan 1	4,400
ii	Received from Reaction Department	56,800
	Total Units accounted for by the Filling Department	61,200
B	Units to be assigned costs:
			Equivalent Units
S.No	Particulars	Whole Units	Direct Materials	Conversion
i	Inventory in Process, Jan 1 (40% completed)	4,400	0	2,640
ii	Started and completed in January	51,900	51,900	51,900
iii	Transferred to Finished Goods in January (i+ii)	56,300	51,900	54,540
iv	Inventory in Process, Jan 31 (10% completed)	4,900	4,900	490
v	Total Units to be assigned costs ( iii + iv)	61,200	56,800	55,030
C	Cost Information
	Cost per equivalent Unit:
S.No.	Particulars	Direct Materials	Conversion	Total
i.	Total costs for January in Filling Department $	9,94,000	6,49,354
ii	Total Equivalent Units	56,800	55,030
iii	Cost per equivalent Units (i/ii)	17.50	11.80
D	Costs assigned to Production:
S.No.	Particulars	Direct Materials	Conversion	Total
i	Inventory in Process, Jan 1 - Given			98,296
ii	Costs incurred in January			16,43,354
iii	Total costs accounted for by the Filling Department (i+ii)			17,41,650
	Costs allocated to completed and partially completed units:
i	Inventory in Process, Jan 1 balance			98,296
ii	To complete Inventory in Process, Jan 1 (2640*$11.80)	0	31,152	31,152
iii	Cost of completed January 1 Work-in-Proces (i+ii)			1,29,448
iv	Started and completed in January	9,08,250	6,12,420	15,20,670
v	Transferred to finished goods in January (iii+iv)			16,50,118
vi	Inventory in Process, Jan 31	85,750	5,782	91,532
vii	Total costs assigned by the Filling Department			17,41,650

Q 2

Date	Account Heads	Debit $	Credit $
Jan 31,	Work-in-Process - Filling	9,94,000
	Work-in-Process Reaction		9,94,000
	(Being the entry to record the transfer of cost from Reaction to Filling)
Jan-31	Finished Goods	16,50,118
	Work-in-Process - Filling		16,50,118
	(Being the entry to record transfer from Filling to Finished Goods)

Q3)

	Increase or decrease in cost of equivalent units from December 31 to January 31
S.No.	Particulars	increase / Decrease	Amount $
1	Change in direct materials cost per equivalent unit ($17.50-$17.70)	Decrease	-0.20
2	Change in conversion cost per equivalent unit ($11.80- $11.60)	Increase	0.20

Q 4

The Cost of Production Report can be utilized as a basis for allocating products costs between work-in-process and fnished goods. The Cost of Product Report can also serve as a Control report to track variances. By doing so, it would facilitate evauation of Heads of each department and holding them accountable for the units entering production and the adverse costs variances in their respective departments. The Department heads could use the adverse variances in their department and investigate reasons therefor.