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., 4,100 units, 2/5 completed					10,168
	31	Direct materials, 164,000 units	377,200				387,368
	31	Direct labor	79,300				466,668
	31	Factory overhead	19,832				486,500
	31	Goods transferred, 165,000 units			?
	31	Bal., ? units, 3/5 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 $9,020 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

Solution 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			4100
Received from materials storeroom			164000
Total units accounted for by the Roasting Department			168100
Units to be assigned costs:
		Equivalent Units
	Whole Units	Direct Materials	Conversion
Inventory in process, July 1	4100	0	2460
Started and completed in July	160900	160900	160900
Transferred to Packing Department in July	165000	160900	163360
Inventory in process, July 31	3100	3100	1860
Total units to be assigned costs	168100	164000	165220
Cost Information
Costs per equivalent unit:
		Direct Materials	Conversion
Total costs for July in Roasting Department		$377,200.00	$99,132.00
Total equivalent units		164000	165220
Cost per equivalent unit		$2.30	$0.60
Costs charged to production:
	Direct Materials	Conversion	Total
Inventory in process, July 1	$9,020.00	$1,148.00	$10,168.00
Costs incurred in July	$377,200.00	$99,132.00	$476,332.00
Total costs accounted for by the Roasting Department	$386,220.00	$100,280.00	$486,500.00
Cost allocated to completed and partially completed units:
Inventory in process, July 1 balance	$9,020.00	$1,148.00	$10,168.00
To complete inventory in process, July 1	$0.00	$1,476.00	$1,476.00
Cost of completed July 1 work in process	$9,020.00	$2,624.00	$11,644.00
Started and completed in July	$370,070.00	$96,540.00	$466,610.00
Transferred to Packing Department in July	$379,090.00	$99,164.00	$478,254.00
Inventory in process, July 31	$7,130.00	$1,116.00	$8,246.00
Total costs assigned by the Roasting Department	$386,220.00	$100,280.00	$486,500.00

Solution 2:

Direct material cost per unit for June = $9,020 / 4100 = $2.20 per unit

Conversion cost per unit for June = $1,148 / (4100*2/5) = $0.70 per unit

Change in direct materials cost per equivalent unit from June to July = $2.30 - $2.20 = $0.10 Increase

Change in conversion cost per equivalent unit from June to July = $0.60 - $0.70 = $0.10 Decrease