Question

Cost of Production Report

Hana 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., 6,400 units, 2/5 completed					19,968
	31	Direct materials, 288,000 units	835,200				855,168
	31	Direct labor	161,000				1,016,168
	31	Factory overhead	40,264				1,056,432
	31	Goods transferred, 289,000 units			?
	31	Bal., ? units, 1/5 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.

Hana 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 Molding Department in July			$
Inventory in process, July 31
Total costs assigned by the Roasting Department			$

Feedback

1. Calculate equivalent units for materials and conversion costs. Calculate the cost per equivalent unit for materials and conversion costs. Calculate the costs assigned to the beginning inventory, the units started and completed, and the ending inventory.

2. Assuming that the July 1 work in process inventory includes $17,920 of direct materials, determine the increase or decrease in the cost per equivalent unit for direct materials and conversion between February and July. If required, round your answers to the nearest cent.

	Increase or Decrease	Amount
Change in direct materials cost per equivalent unit	Increase	$
Change in conversion cost per equivalent unit	Decrease

Answer 1

Solution 1:

Hana Coffee
Roasting Department
Computation of Equivalent unit (FIFO)
Particulars	Physical units	Material	Conversion
Units to be accounted for:
Beginning WIP Inventory	6400
Units started this period	288000
Total unit to be accounted for	294400
Units Accounted for:
Units completed and transferred out
From beginning inventory Material - 0% Conversion - 3/5	6400	0	3840
Started and completed currently	282600	282600	282600
Units in ending WIP Material - 100% Conversion - 1/5	5400	5400	1080
Total units accounted for	294400	288000	287520

Hana Coffee
Roasting Department
Computation of Cost per Equivalent unit
Particulars	Total cost	Material	Conversion
Current period cost	$1,036,464.00	$835,200.00	$201,264.00
Equivalent units		288000	287520
Cost per equivalent unit		$2.90	$0.70

Hana Coffee
Roasting Department
Producton cost report - FIFO
Particulars	Total cost	Material	Conversion
Cost Accounted for :
Cost assigned to unit transferred out:
Cost from beginning WIP Inventory	$19,968
Current cost added to complete beginning WIP:
Material	$0	$0
Conversion (3840 * $0.70)	$2,688		$2,688
Total Cost from beginning inventory	$22,656
Current cost of unit started and completed:
Material (282600*$2.90)	$819,540	$819,540
Conversion (282600*$0.70)	$197,820		$197,820
Total cost of unit started and completed	$1,017,360
Total cost of unit transferred out	$1,040,016
Cost assigned to ending WIP:
Material (5400*$2.90)	$15,660	$15,660
Conversion (1080*$0.70)	$756		$756
Total ending WIP inventory	16,416
Total cost accounted for	$1,056,432

Solution 2:

Cost per equivalant unit of material in opening WIP = $17,920 / 6400 = $2.80

Cost per equivalant unit of material during current period = $2.90

Change in direct materials cost per equivalent unit = $2.90 - $2.80 = $0.10 Increase

Cost per equivalant unit of conversion in opening WIP = ($19,968 - $17,920) / (6400*2/5) = $0.80

Cost per equivalant unit of material during current period = $0.70

Change in direct materials cost per equivalent unit = $0.70 - $0.80 = $0.10 Decrease