Question

Executive Designs began making high-quality office furniture in January. The company's executive desks are produced in two departments: Cutting and Finishing. Component kits are produced in the Cutting Department and then transferred to the Finishing Department for trimming and assembly. During its first month of operations, the Cutting Department started 15,000 executive desk kits. January direct materials costs in the Cutting Department totaled $600,000, and conversion costs totaled $590,000. Ending inventory on January 31 consisted of 4,000 partially processed component kits. These units were 100 percent complete with respect to direct materials, but only 20 percent complete with respect to conversion.

Assume that on January 31 the Finishing Department of Executive Designs had 3,000 partially trimmed and assembled executive desks in ending inventory. These units were, of course, 100 percent complete with respect to components transferred in from the Cutting Department, but only 30 percent complete with respect to direct trim materials, and 60 percent complete with respect to conversion. During January, the Finishing Department incurred direct materials costs (for trim) of $142,400, and conversion costs of $235,200.

a. Compute how many units were started in the Finishing Department during January.

b. Compute the number of executive desks transferred out of the Finishing Department in January.

c. Compute the equivalent units of input resources for the Finishing Department in January.

d. Compute the cost per equivalent unit of input resource for the Finishing Department in January.

e. Prepare the summary journal entry required to transfer the cost of executive desks from the Finishing Department's Work in Process Inventory to the company's Finished Goods Inventory in January.

f. Compute the total cost assigned to the Finishing Department's ending inventory in process on January 31.

Answer 1

CUTTING DEPARTMENT
UNITS TO ACCOUNT FOR:
Beginning Work in Process units				0
Add: Units Started in Process				15,000
Total Units to account for:				15,000
UNITS TO BE ACCOUNTED FOR:
Units started and completed				11,000
Ending Work in Process				4,000
Total Units to be accounted for:				15,000
Equivalent Units:
			Material Cost		Conversion
			% Completion	Units	% Completion	Units
Units started and completed			100%	11,000	100%	11,000
Ending Work in Process			100%	4,000	20%	800
Total Equivalent units				15,000		11,800
COST PER EQUIVALENT UNIT:
			Material		Conversion
Total cost added during the year			600,000		590,000
Equivalent Units			15,000		11,800
Cost per Equivalent unit			40		50
TOTAL COST ACCOUNTED FOR:
Units started and Transferred out (11000 units)
			Equivalent unit	Cost per EU	Total Cost
Material			11,000	40	440000
Conversion Cost			11,000	50	550000
Total Cost of Units completed and transferred out:					990000
Ending Work in process (4,000 units)
			Equivalent unit	Cost per EU	Total Cost
Material			4,000	40	160000
Conversison Cost			800	50	40000
Total cost of Ending Work in process:					200,000
FINISHING DEPARTMENT
UNITS TO ACCOUNT FOR:
Beginning Work in Process units				0.00
Add: Units Started in Process				11,000.00
Total Units to account for:				2,400.00
UNITS TO BE ACCOUNTED FOR:
Units started and completed				8,000.00
Ending Work in Process				3,000.00
Total Units to be accounted for:				11,000.00
Equivalent Units:
			Transferred in Cost		Material Cost		Conversion Cost
			% Completion	Units	% Completion	Units	% Completion	Units
Units started annd completed			100%	8,000.00	100%	8,000.00	100%	8,000.00
Ending Work in Process			100%	3,000.00	30%	900.00	60%	1,800.00
Total Equivalent units				11,000.00		8,900.00		9,800.00
COST PER EQUIVALENT UNIT:
			Transferred-in		Material		Conversion
Cost added during the period			990,000		142,400		235,200
Equivalent Units			11,000.00		8,900.00		9,800.00
Cost per Equivalent unit			90.00		16.00		24.00
TOTAL COST ACCOUNTED FOR:
Units started and Completed and Transferred out (8000 units)
			Equivalent unit	Cost per EU	Total Cost
Transferred-in cost			8,000	90	720000
Material cost			8,000	16	128000
Conversion Cost			8,000	24	192000
Total Cost of Units completed and transferred out:					1,040,000
Ending Work in Process (3000 units)
			Equivalent unit		Total Cost
Transferred-in cost			3,000.00	90	270000
Material cost			900.00	16	14400
Conversion Cost			1,800.00	24	43200
Total cost of Ending Work in process:					327,600
Req A: Units started in Finishing: 11000 units
Req b: Number of units transferred out: 8000 unts
Req c:Equivalen unit:
Trnsfrred in		11000
materiala		8900
conversion		9800
Req d: Cost per equivalent units:
Trnsfrred in		90
Material		16
conversion		24
Req e: Journal entry:
Finished Goods inventory Dr.			1,040,000
Work in process- Finishing				1,040,000
Req f:
Ending inventory cost:			$327,600