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 (4,800 units, 60% completed): Direct materials (4,800 x $12.70) $60,960 Conversion (4,800 x 60% x $8.30) 23,904 $84,864 The following costs were charged to Work in Process—Filling during January: Direct materials transferred from Reaction Department: 61,900 units at $12.50 a unit $773,750 Direct labor 269,060 Factory overhead 258,508 During January, 61,400 units of specialty chemicals were completed. Work in Process—Filling Department on January 31 was 5,300 units, 40% 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 Costs per equivalent unit: Direct Materials Conversion Total costs for January in Filling Department $ $ Total equivalent units Cost per equivalent unit $ $ Costs charged to production: Direct Materials Conversion Total Inventory in process, January 1 $ Costs incurred in January Total costs accounted for by the Filling Department $ Cost 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 costs transferred from Filling to Finished Goods. (1) (2) 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 $ Change in conversion cost per equivalent unit 4. The cost of production report may be used as the basis for allocating product costs between and . 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

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	4800
Units started this period	61900
Total unit to be accounted for	66700
Units Accounted for:
Units completed and transferred out
From beginning inventory Material - 0% Conversion - 40%	4800	0	1920
Started and completed currently	56600	56600	56600
Transferred to finished goods	61400	56600	58520
Units in ending WIP Material - 100% Conversion - 40%	5300	5300	2120
Total units accounted for	66700	61900	60640

Dover Chemical Company
Filling Department
Computation of Cost per Equivalent unit
Particulars	Total cost	Material	Conversion
Current period cost	$1,301,318.00	$773,750.00	$527,568.00
Equivalent units		61900	60640
Cost per equivalent unit		$12.50	$8.70

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	$84,864	$60,960	$23,904
Current cost added to complete beginning WIP:
Material	$0	$0
Conversion (1920 * $8.70)	$16,704		$16,704
Total Cost from beginning inventory	$101,568	$60,960	$40,608
Current cost of unit started and completed:
Material (56600*$12.50)	$707,500	$707,500
Conversion (56600*$8.70)	$492,420		$492,420
Total cost of unit started and completed	$1,199,920	$707,500	$492,420
Total cost of unit transferred out	$1,301,488	$768,460	$533,028
Cost assigned to ending WIP:
Material (5300*$12.50)	$66,250	$66,250
Conversion (2120*$8.70)	$18,444		$18,444
Total ending WIP inventory	$84,694	$66,250	$18,444
Total cost accounted for	$1,386,182	$834,710	$551,472

Solution 2:

Journal Entries - Dover Chemical Company
S. No.	Particulars	Debit	Credit
1	Work In Process - Filling Department Dr	$773,750.00
	To Work In Process - Reaction Department		$773,750.00
	(Being cost of goods completed in reaction transferred to Filling department)
2	Finished Goods Inventory Dr	$1,301,488.00
	To Work In Process - Filling Department		$1,301,488.00
	(Being completed units transferred to finished goods)

Solution 3:

Change in cost per equivalent unit for material from December to January = $12.50 - $12.70 = $0.20 Decrease

Change in cost per equivalent unit for conversion from December to January = $8.70 - $8.30 = $0.40 Increase

Solution 4:

The cost of production report may be used as the basis for allocating product costs between Units Completed & Transferred and Ending WIP . 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.