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
(5,200 units, 40% completed):
	Direct materials (5,200 x $13.3)	$69,160
	Conversion (5,200 x 40% x $8.6)	17,888
		$87,048

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

Direct materials transferred from Reaction
	Department: 67,100 units at $13 a unit	$872,300
Direct labor		302,930
Factory overhead		291,056

During January, 66,500 units of specialty chemicals were completed. Work in Process—Filling Department on January 31 was 5,800 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

Solution 1:

Dover Chemical Company
Filling Department
Computation of Equivalent unit (FIFO)
Particulars	Physical units	Material	Conversion
Units to be accounted for:
Beginning WIP Inventory	5200
Units started this period	67100
Total unit to be accounted for	72300
Units Accounted for:
Units completed and transferred out
From beginning inventory Material - 0% Conversion - 60%	5200	0	3120
Started and completed currently	61300	61300	61300
Transferred to finished goods	66500	61300	64420
Units in ending WIP Material - 100% Conversion - 40%	5800	5800	2320
Total units accounted for	72300	67100	66740

Dover Chemical Company
Filling Department
Computation of Cost per Equivalent unit
Particulars	Total cost	Material	Conversion
Current period cost	$1,466,286.00	$872,300.00	$593,986.00
Equivalent units		67100	66740
Cost per equivalent unit		$13.00	$8.90

Dover Chemical Company
Filling Department
Producton cost report - FIFO
Particulars	Total cost	Material	Conversion
Cost Accounted for :
Cost assigned to unit transferred out:
Cost from beginning WIP Inventory	$87,048	$69,160	$17,888
Current cost added to complete beginning WIP:
Material	$0	$0
Conversion (3120 * $8.90)	$27,768		$27,768
Total Cost from beginning inventory	$114,816	$69,160	$45,656
Current cost of unit started and completed:
Material (61300*$13)	$796,900	$796,900
Conversion (61300*$8.90)	$545,570		$545,570
Total cost of unit started and completed	$1,342,470	$796,900	$545,570
Total cost of unit transferred out	$1,457,286	$866,060	$591,226
Cost assigned to ending WIP:
Material (5800*$13)	$75,400	$75,400
Conversion (2320*$8.90)	$20,648		$20,648
Total ending WIP inventory	$96,048	$75,400	$20,648
Total cost accounted for	$1,553,334	$941,460	$611,874

Solution 2:

Journal Entries - Dover Chemical Company
S. No.	Particulars	Debit	Credit
1	Work In Process - Filling Department Dr	$872,300.00
	To Work In Process - Reaction Department		$872,300.00
	(Being cost of goods completed in reaction transferred to Filling department)
2	Finished Goods Inventory Dr	$1,457,286.00
	To Work In Process - Filling Department		$1,457,286.00
	(Being completed units transferred to finished goods)

Solution 3:

Change in direct materials cost per equivalent unit = $13.30 - $13 = $0.30 Decrease

Change in conversion cost per equivalent unit = $8.90 - $8.60 = $0.30 Increase

Solution 4:

The cost of production report may be used as the basis for allocating product costs between cost of unit completed and ending WIP . 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.