Question

Venus Chocolate Company processes chocolate into candy bars. The process begins by placing direct materials (raw chocolate, milk, and sugar) into the Blending Department. All materials are placed into production at the beginning of the blending process. After blending, the milk chocolate is then transferred to the Molding Department, where the milk chocolate is formed into candy bars. The following is a partial work in process account of the Blending Department at March 31, 2016:

ACCOUNT Work in Process—Blending Department							ACCOUNT NO.
Date		Item	Debit		Credit		Balance
							Debit		Credit
Mar.	1	Bal., 4,100 units, 4/5 completed					9,758
	31	Direct materials, 164,000 units	328,000				337,758
	31	Direct labor	65,700				403,458
	31	Factory overhead	16,400				419,858
	31	Goods transferred, 165,000 units			?
	31	Bal., ? units, 4/5 completed					?

Required:

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

Venus Chocolate Company
Cost of Production Report-Blending Department
For the Month Ended March 31, 2016
Unit Information
Units charged to production:
Inventory in process, March 1
Received from materials storeroom
Total units accounted for by the Blending Department
Units to be assigned costs:
		Equivalent Units
	Whole Units	Direct Materials	Conversion
Inventory in process, March 1
Started and completed in March
Transferred to Molding Department in March
Inventory in process, March 31
Total units to be assigned costs
Cost Information
Costs per equivalent unit:
		Direct Materials	Conversion
Total costs for March in Blending Department		$	$
Total equivalent units
Cost per equivalent unit		$	$
Costs charged to production:
	Direct Materials	Conversion	Total
Inventory in process, March 1			$
Costs incurred in March
Total costs accounted for by the Blending Department			$
Cost allocated to completed and partially completed units:
Inventory in process, March 1 balance			$
To complete inventory in process, March 1	$	$
Cost of completed March 1 work in process			$
Started and completed in March
Transferred to Molding Department in March			$
Inventory in process, March 31
Total costs assigned by the Blending Department			$

2. Assuming that the March 1 work in process inventory includes $7,790 of direct materials, determine the increase or decrease in the cost per equivalent unit for direct materials and conversion between February and March. 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

Solution 1:

Venus Choclate Company
Blending Department
Computation of Equivalent unit (FIFO)
Particulars	Physical units	Material	Conversion
Units to be accounted for:
Beginning WIP Inventory	4100
Units started this period	164000
Total unit to be accounted for	168100
Units Accounted for:
Units completed and transferred out
From beginning inventory Material - 0% Conversion - 1/5	4100	0	820
Started and completed currently	160900	160900	160900
Units in ending WIP Material - 100% Conversion - 4/5	3100	3100	2480
Total units accounted for	168100	164000	164200

Venus Choclate Company
Blending Department
Computation of Cost per Equivalent unit
Particulars	Total cost	Material	Conversion
Current period cost	$410,100.00	$328,000.00	$82,100.00
Equivalent units		164000	164200
Cost per equivalent unit		$2.00	$0.50

Venus Choclate Company
Blending Department
Producton cost report - FIFO
Particulars	Total cost	Material	Conversion
Cost Accounted for :
Cost assigned to unit transferred out:
Cost from beginning WIP Inventory	$9,758
Current cost added to complete beginning WIP:
Material	$0	$0
Conversion (820 * $0.50)	$410		$410
Total Cost from beginning inventory	$10,168
Current cost of unit started and completed:
Material (160900*$2)	$321,800	$321,800
Conversion (160900*$0.50)	$80,450		$80,450
Total cost of unit started and completed	$402,250
Total cost of unit transferred out	$412,418
Cost assigned to ending WIP:
Material (3100*$2)	$6,200	$6,200
Conversion (2480*$0.50)	$1,240		$1,240
Total ending WIP inventory	7,440
Total cost accounted for	$419,858

Solution 2:

Cost per equivalant unit of direct material in february = $7,790 / 4100 = $1.90

Cost per equivalant unit of conversion in february = ($9,758 - $7,790) / 3280 = $0.60

Change in direct materials cost per equivalent unit from february to march = $2 - $1.90 = $0.10 Increase

Change in conversion cost per equivalent unit = $0.50 - $0.60 = $0.10 decrease