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
(2,800 units, 70% completed):
	Direct materials (2,800 x $12.8)	$35,840
	Conversion (2,800 x 70% x $8.3)	16,268
		$52,108

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

Direct materials transferred from Reaction
	Department: 36,100 units at $12.6 a unit	$454,860
Direct labor		148,040
Factory overhead		142,235

During January, 35,800 units of specialty chemicals were completed. Work in Process—Filling Department on January 31 was 3,100 units, 10% 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			$

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)	Work in Process-Filling Department
	Factory Overhead-Filling Department

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	Decrease	$

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

1.

	Physcial units	Material	Conversion
Work in Process Beginning	2800
Started during the period	36100
To account for	38900
Work in Process Beginning	2800	0	840
Units started and completed	33000	33000	33000
Units transferred to next department	35800	33000	33840
Ending Work in Process :	3100	3100	310
Accounted for	38900
Equivalent units		36100	34150
	Materials	Conversion	Total
Cost added during the period	$           4,54,860	$           2,90,275	$           7,45,135
Equivalent units of Production	36100	34150
Cost per equivalent unit	$                12.60	$                  8.50	$                21.10
Cost Reconciliation
	Materials	Conversion	Total
Ending work in Process Inventory
Equivalent units of Production	3100	310
Cost per equivalent unit	$                12.60	$                  8.50
Cost of Ending work in Process Inventory	$              39,060	$                2,635	$              41,695
	Materials	Conversion	Total
Units Completed and transferred out
Cost of Beginning Work in Process	$              35,840	$              16,268	$              52,108
Cost of work on Beginning Work in Process	$                       -	$                7,140	$                7,140
Total Cost of Beginning WIP	$              35,840	$              23,408	$              59,248
Units started and completed	33000	33000
Cost per equivalent unit	$                12.60	$                  8.50
Cost of units started and completed	$          4,15,800	$          2,80,500	$          6,96,300
Cost of units transferred out	$          4,51,640	$          3,03,908	$          7,55,548
Reconciliation
Costs to be accounted for :
Cost of beginning work in process inventory	$              52,108
Costs added to the production during the year	$           7,45,135
Total Costs to be accounted for	$          7,97,243
Cost of Ending work in Process Inventory	$              41,695
Cost of units transferred out	$           7,55,548
Total Costs accounted for	$          7,97,243

2.

Account Titles	Debit	Credit
Work in Process-Filling Department	$           4,54,860
Work in Process-Reaction Department		$           4,54,860
Finished Goods Inventory	$           7,55,548
Work in Process-Filling Department		$           7,55,548

3.

	Increase or Decrease	Amount
Change in direct materials cost per equivalent unit	Decrease	$              0.20
Change in conversion cost per equivalent unit	Increase	$              0.20

4.