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Work in Process Account Data for Two Months; Cost of Production Reports Pittsburgh Aluminum Company uses...

Work in Process Account Data for Two Months; Cost of Production Reports Pittsburgh Aluminum Company uses a process cost system to record the costs of manufacturing rolled aluminum, which consists of the smelting and rolling processes. Materials are entered from smelting at the beginning of the rolling process. The inventory of Work in Process—Rolling on September 1 and debits to the account during September were as follows: Bal., 2,600 units, ¼ completed: Direct materials (2,600 x $15.50) $40,300 Conversion (2,600 x ¼ x $8.50) 5,525 $45,825 From Smelting Department, 28,900 units $462,400 Direct labor 158,920 Factory overhead 101,402 During September, 2,600 units in process on September 1 were completed, and of the 28,900 units entering the department, all were completed except 2,900 units that were 4/5 completed. Charges to Work in Process—Rolling for October were as follows: From Smelting Department, 31,000 units $511,500 Direct labor 162,850 Factory overhead 104,494 During October, the units in process at the beginning of the month were completed, and of the 31,000 units entering the department, all were completed except 2,000 units that were 2/5 completed. Required: 1. Enter the balance as of September 1 in a four-column account for Work in Process—Rolling. Record the debits and the credits in the account for September. Construct a cost of production report and present computations for determining (a) equivalent units of production for materials and conversion, (b) costs per equivalent unit, (c) cost of goods finished, differentiating between units started in the prior period and units started and finished in September, and (d) work in process inventory. If an amount box does not require an entry, leave it blank. ACCOUNT Work in Process-Rolling Department ACCOUNT NO. BALANCE DATE ITEM POST. REF. DEBIT CREDIT DEBIT CREDIT Sept. 1 Bal., 2,600 units, 1/4 completed 45,825 Sept. 30 Smelting Dept., 28,900 units at $16.00/unit 462,400 508,225 Sept. 30 Direct labor 158,920 667,145 Sept. 30 Factory overhead 101,402 768,547 Sept. 30 Finished goods 702,195 66,352 Sept. 30 Bal., 2,900 units, 4/5 completed 66,352 If an amount is zero, enter in a zero "0". Round cost per unit answers to the nearest cent. Pittsburgh Aluminum Company Cost of Production Report-Rolling Department For the Month Ended September 30 Whole Units Equivalent Units Units Direct Materials (a) Conversion (a) Units charged to production: Inventory in process, September 1 2,600 Received from Smelting Department 28,900 Total units accounted for by the Rolling Department 31,500 Units to be assigned costs: Inventory in process, September 1 2,600 1,950 Started and completed in September 26,000 26,000 26,000 Transferred to finished goods in September 28,600 26,000 27,950 Inventory in process, September 30 2,900 2,900 2,320 Total units to be assigned costs 31,500 28,900 30,270 Costs Costs Direct Materials Conversion Total Costs Cost per equivalent unit: Total costs for September in Rolling Department $ 462,400 $ 260,322 Total equivalent units 28,900 30,270 Cost per equivalent unit (b) $ 16.00 $ 8.60 Costs assigned to production: Inventory in process, September 1 $ 45,825 Costs incurred in September 722,722 Total costs accounted for by the Rolling Department $ 768,547 Costs allocated to completed and partially completed units: Inventory in process, September 1 balance (c) $ 45,825 To complete inventory in process, September 1 (c) $ $ 16,770 16,770 Cost of completed September 1 work in process $ 62,595 Started and completed in September (c) 416,000 223,600 639,600 Transferred to finished goods in September (c) $ 702,195 Inventory in process, September 30 (d) 46,400 19,952 66,352 Total costs assigned by the Rolling Department $ 768,547 2. Provide the same information for October by recording the October transactions in the four-column work in process account. Construct a cost of production report, and present the October computations (a through d) listed in part (1). If an amount box does not require an entry, leave it blank. ACCOUNT Work in Process-Rolling Department ACCOUNT NO. Balance DATE ITEM POST. REF. DEBIT CREDIT DEBIT CREDIT Oct. 1 Balance Oct. 31 Smelting Dept., 31,000 units at $16.50/unit 511,500 577,852 Oct. 31 Direct labor 162,850 740,702 Oct. 31 Factory overhead 104,494 845,196 Oct. 31 Finished goods 805,156 40,040 Oct. 31 Bal., 2,000 units, 2/5 completed 40,040 If an amount is zero, enter in a zero "0". Round cost per unit answers to the nearest cent. Pittsburgh Aluminum Company Cost of Production Report-Rolling Department For the Month Ended October 31 Whole Units Equivalent Units Units Direct Materials (a) Conversion (a) Units charged to production: Inventory in process, October 1 2,900 Received from Smelting Department 31,000 Total units accounted for by the Rolling Department 33,900 Units to be assigned costs: Inventory in process, October 1 2,900 580 Started and completed in October 29,000 29,000 29,000 Transferred to finished goods in October 31,900 29,000 29,580 Inventory in process, October 31 2,000 2,000 800 Total units to be assigned costs 33,900 31,000 30,380 Costs Costs Direct Materials Conversion Total Costs Cost per equivalent unit: Total costs for October in Rolling Department $ 511,500 $ 267,344 Total equivalent units 31,000 30,380 Cost per equivalent unit (b) $ 16.50 $ 8.80 Costs assigned to production: Inventory in process, October 1 $ 66,352 Costs incurred in October 778,844 Total costs accounted for by the Rolling Department $ 845,196 Costs allocated to completed and partially completed units: Inventory in process, October 1 balance (c) $ 66,352 To complete inventory in process, October 1 (c) $ $ 5,104 5,104 Cost of completed October 1 work in process $ 71,456 Started and completed in October (c) 478,500 255,200 733,700 Transferred to finished goods in October (c) $ 805,156 Inventory in process, October 31 (d) 33,000 7,040 40,040 Total costs assigned by the Rolling Department $ 845,196 3. The cost per equivalent unit for direct materials increased from August to October. The cost per equivalent unit for conversion costs increased from August to October. These changes should be investigated for their underlying causes, and any necessary corrective actions should be taken.

Solutions

Expert Solution

1a)

Balances on Sept 1 for Work-in Progress - Rolling
Date Item Debit Credit Balance
Debit Credit
Sept. 1 Beginning 2,600 units , 1/4 completed 45,825
Sept. 30 Smelting Dept. 28,900 units @ 16/unit 462,400 508,225
Sept. 30 Direct Labor 158,920 667,145
Sept. 30 Factory Overhead 101,402 768,547
Sept. 30 Finished Goods 702,195 66,352
Sept. 30 Balance 2,900 units, 4/5 completed 66,352

1b)

Cost of Production Report
P A Company
Cost of Production Report - Rolling Department
For the month ended Sept 30
Units Whole Units Equivalent Units
Direct Material Conversion
Units charged to Production:
Inventory in progress, sept 1 2,600
Add: Received from Smelting Department 28,900
Total Units 31,500
Units to be assigned cost:
Inventory in Progress, sept 1 (1/4 completed)[2,600*(1-1/4)] 2,600 1,950

Add: Started and completed in September (28,900-2,900)

26,000 26,000 26,000
Transferred to finished goods 28,600 26,000 27,950
Add: Inventory in Progress Oct 30, (2/5 completed) (2,00 * 2/5) 2,600 2,900 2,320
Total Units to be assigned cost 31,500 28,900 30,270
Costs Equivalent Units
Direct Material Conversion Total
Costs per Equivalent Units:
Total costs for sept 1 (158,920+101,402) 462,400 260,322
Total Equivalent units 28,900 30,270
Costs per Equivalent units 16 8.6
Cost assigned to Production:
Inventory in progress Sept 1 45,825
Costs Incurred in Sept (462,400+158,920+101,402) 722,722
Total cost Accounted by Rolling Dept. 767,547
Cost Allocated to completed or partially completed goods:
Inventory in progress Sept 1 45,825
Completed Inventory in Progress (1,950*8.6) 16,770 16,770
Cost of completed Inventory in progress 62,595
Started and completed in September (26,000*16 , 8.6) 416,000 223,600 639,600
Transfer to finished goods in September 702,195
Inventory in Progress Sept 30 (2,900*16), (2,320*8.6) 46,400 19,952 66,352
Total Costs assigned by the Rolling Department 768,547

2a)

Balances on Oct 1 for Work-in Progress - Rolling
Date Item Debit Credit Balance
Debit Credit
Oct 31 Smelting Dept. 31,000 units @ 16.5/unit 511,500 577,852
Direct Labor 162,850 740,702
Factory Overhead 104,494 845,196
Finished Goods 805,156 40,040
Balance 2,000 units, 2/5 completed 40,040

2b)

Cost of Production Report
P A Company
Cost of Production Report - Rolling Department
For the month ended Oct 31
Units Whole Units Equivalent Units
Direct Material Conversion
Units charged to Production:
Inventory in progress, Oct 1 2,900
Add: Received from Smelting Department 31,000
Total Units 33,900
Units to be assigned cost:
Inventory in Progress, Oct 1 (1/4 completed) 2,900 580

Add: Started and completed in September (31,000-2,000)

29,000 29,000 29,000
Transferred to finished goods 31,900 29,000 29,580
Add: Inventory in Progress Oct 31, (2/5 completed) (2,000 * 2/5) 2,000 2,000 800
Total Units to be assigned cost 33,900 31,000 30,380
Costs Equivalent Units
Direct Material Conversion Total
Costs per Equivalent Units:
Total costs for Oct 1 (162,850+104,494) 511,500 267,344
Total Equivalent units 31,000 30,380
Costs per Equivalent units 16.5 8.8
Cost assigned to Production:
Inventory in progress Oct 1 66,352
Costs Incurred in Oct (511,500+162,850+104,494) 778,844
Total cost Accounted by Rolling Dept. 845,196
Cost Allocated to completed or partially completed goods:
Inventory in progress Oct 1 66,352
Completed Inventory in Progress (580*8.8) 5,104 5,104
Cost of completed Inventory in progress 71,456
Started and completed in October (29,000*16.5 , 8.8) 464,000 255,200 733,700
Transfer to finished goods in October 805,156
Inventory in Progress Oct 31 (2,000*16.5), (800*8.8) 33,000 7,040 40,040
Total Costs assigned by the Rolling Department 845,196

3) From the above calculations, the cost per equivalent for direct material was increased from 16 to 16.5, from September to October. Similarly, the cost per equivalent for conversion was increased from 8.6 to 8.8, fro,m September to October. These increases should be tested for reasons and corrective action should be taken.


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