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
(5,500 units, 30% completed):
	Direct materials (5,500 x $12.3)	$67,650
	Conversion (5,500 x 30% x $8)	13,200
		$80,850

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

Direct materials transferred from Reaction
	Department: 71,000 units at $12.1 a unit	$859,100
Direct labor		295,170
Factory overhead		283,586

During January, 70,400 units of specialty chemicals were completed. Work in Process—Filling Department on January 31 was 6,100 units, 30% 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			$

Feedback

2. Journalize the entries for (1) costs transferred from Reaction to Filling and (2) the cost transferred from Filling to Finished Goods.

(1)	Work in Process-Filling Department
	Work in Process-Reaction Department
(2)	Finished Goods
	Work in Process-Filling Department

Feedback

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	Decrease	$
Change in conversion cost per equivalent unit	Increase	$

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 Work in Process and Finished Goods . 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

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			5500
Received from Reaction Department			71000
Total units accounted for by the Filling Department			76500
Units to be assigned costs:
		Equivalent Units
	Whole Units	Direct Materials	Conversion
Inventory in process, January 1	5500	0	3850
Started and completed in January	64900	64900	64900
Transferred to Packing Department in January	70400	64900	68750
Inventory in process, January 31	6100	6100	1830
Total units to be assigned costs	76500	71000	70580
Cost Information
Costs per equivalent unit:
		Direct Materials	Conversion
Total costs for January in Filling Department		859100	578756
Total equivalent units		71000	70580
Cost per equivalent unit		12.1	8.2
Costs charged to production:
	Direct Materials	Conversion	Total
Inventory in process, January 1			80850
Costs incurred in January			1437856
Total costs accounted for by the Filling Department			1518706
Cost allocated to completed and partially completed units:
Inventory in process, January 1 balance			80850
To complete inventory in process, January 1	0	31570	31570
Cost of completed January 1 work in process			112420
Started and completed in January	785290	532180	1317470
Transferred to finished goods in January			1429890
Inventory in process, January 31	73810	15006	88816
Total costs assigned by the Filling Department			1518706
2
Work in Process-Filling Department	859100
Work in Process-Reaction Department		859100
Finished Goods	1429890
Work in Process-Filling Department		1429890
3
	Increase or Decrease	Amount
Change in direct materials cost per equivalent unit	Decrease	0.2
Change in conversion cost per equivalent unit	Increase	0.2
4
The cost of production report may be used as the basis for allocating product costs between Work in Process and Finished Goods .