Question

Dover Chemical Company manufactures specialty chemical 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 separtments, emerging as finished chemicals,

The balance in the account Work in Process-Filling was as follows

Work in Process- Filling Department

(3,400 units, 60% completed):

Direct Materials $32,520

Conversion (3,400x60%x3.90) 7956

40520

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

Direct Materias transferres from Reaction

Department: 52,300 units at 9.50 a unit $ 496,850

Direct Labor 101,560

Factory overhead 95,166

During January 53,00 units of specialty chemicals were completed. Work in Process-Filling Department on January 31 was 2,700 units 30% completed

Instructions

1- Prepare a cost of production report for the Filling Department for January

2- Journalize entries for costs transferred from Reaction to Filling and the costs transferred from Filling to Finished Goods

3- Determine the increase or decrease in the cost per equivalent unit from December to January fro direct materials and conversion costs

4- Discuss the uses of the cost of production report and the results of part (3)

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	3400
Units started this period (25700+2600-2300)	52300
Total unit to be accounted for	55700
Units Accounted for:
Units completed and transferred out
From beginning inventory Material - 0% Conversion - 40%	3400	0	1360
Started and completed currently	49600	49600	49600
Transferred to finished goods	53000	49600	50960
Units in ending WIP Material - 100% Conversion - 30%	2700	2700	810
Total units accounted for	55700	52300	51770

Dover Chemical Company
Filling Department
Computation of Cost per Equivalent unit
Particulars	Total cost	Material	Conversion
Current period cost	$693,576.00	$496,850.00	$196,726.00
Equivalent units		52300	51770
Cost per equivalent unit		$9.50	$3.80

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	$40,476	$32,520	$7,956
Current cost added to complete beginning WIP:
Material	$0	$0
Conversion (1360 * $3.80)	$5,168		$5,168
Total Cost from beginning inventory	$45,644	$32,520	$13,124
Current cost of unit started and completed:
Material (49600*$9.50)	$471,200	$471,200
Conversion (49600*$3.80)	$188,480		$188,480
Total cost of unit started and completed	$659,680	$471,200	$188,480
Total cost of unit transferred out	$705,324	$503,720	$201,604
Cost assigned to ending WIP:
Material (2700*$9.50)	$25,650	$25,650
Conversion (810*$3.80)	$3,078		$3,078
Total ending WIP inventory	$28,728	$25,650	$3,078
Total cost accounted for	$734,052	$529,370	$204,682

Solution 2:

Journal Entries - Dover Chemical Company
S. No.	Particulars	Debit	Credit
1	Work In Process - Filling Department Dr	$496,850.00
	To Work In Process - Reaction Department		$496,850.00
	(Being cost of goods completed in reaction transferred to Filling department)
2	Finished Goods Inventory Dr	$705,324.00
	To Work In Process - Filling Department		$705,324.00
	(Being completed units transferred to finished goods)

Solution 3:

Change in equivalent cost per unit of material from december to Janauary = $9.56 - $9.50 = $0.06 Decrease

Change in equivalent cost per unit of conversion from december to Janauary = $3.90 - $3.80 = $0.10 decrease

Solution 4:

Cost of production report is used to identify the value of cost of goods completed and cost of goods in ending WIP. It also helps production manager to identify and control the cost over the period. For example in part 3, we have identified material cost and conversion cost was reduced in this period from previous periods.