Question

Cost of Production Report

Hana Coffee Company roasts and packs coffee beans. The process begins by placing coffee beans into the Roasting Department. From the Roasting Department, coffee beans are then transferred to the Packing Department. The following is a partial work in process account of the Roasting Department at July 31:

ACCOUNT Work in Process—Roasting Department							ACCOUNT NO.
Date		Item	Debit		Credit		Balance
							Debit		Credit
July	1	Bal., 30,000 units, 10% completed					121,800
	31	Direct materials, 155,000 units	620,000				741,800
	31	Direct labor	90,000				831,800
	31	Factory overhead	33,272				865,072
	31	Goods transferred, 149,000 units			?
	31	Bal., ? units, 45% completed					?

Required:

1. Prepare a cost of production report, and identify the missing amounts for Work in Process—Roasting Department. If an amount is zero, enter "0". When computing cost per equivalent units, round to the nearest cent.

Hana Coffee Company
Cost of Production Report-Roasting Department
For the Month Ended July 31
Unit Information
Units charged to production:
Inventory in process, July 1
Received from materials storeroom
Total units accounted for by the Roasting Department
Units to be assigned costs:
		Equivalent Units
	Whole Units	Direct Materials	Conversion
Inventory in process, July 1
Started and completed in July
Transferred to Packing Department in July
Inventory in process, July 31
Total units to be assigned costs
Cost Information
Costs per equivalent unit:
		Direct Materials	Conversion
Total costs for July in Roasting Department		$	$
Total equivalent units
Cost per equivalent unit		$	$
Costs charged to production:
	Direct Materials	Conversion	Total
Inventory in process, July 1			$
Costs incurred in July
Total costs accounted for by the Roasting Department			$
Cost allocated to completed and partially completed units:
Inventory in process, July 1 balance			$
To complete inventory in process, July 1	$	$
Cost of completed July 1 work in process			$
Started and completed in July
Transferred to Packing Department in July			$
Inventory in process, July 31
Total costs assigned by the Roasting Department			$

2. Assuming that the July 1 work in process inventory includes $119,400 of direct materials, determine the increase or decrease in the cost per equivalent unit for direct materials and conversion between June and July. 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		$

Answer 1

Concepts and reason

Equivalent units: It is the number of units with respect to the degree of completion under the work-in-process inventory. It is determined by multiplying the total units under the consideration with a degree of respective completion accordingly with the material cost and conversion cost.

Percentage of completion: Percentage of completion is the percentage of work done on the unit in the process with respect to the degree of completion into the completed unit in the process.

Cost per equivalent unit: Cost per equivalent units are found out by dividing the total respective cost by the respective number of equivalent units.

Fundamentals

Process costing: Process costing is the method of costing which is used to determine the cost of completed units, work-in-process ending inventory units, and values of those. This is used for the industry in which the homogeneous goods are produced.

Work-in-process: Work-in-process refers to those units which are incomplete in respect or materials’ cost or conversion cost or both. These units are not complete enough to treat as completed goods.

Costing: It refers to the process of determining the cost for any object or product. The costing is done through the methods like job costing, process costing, operation costing,and so on.

Equivalent unit for materials cost in completed and transferred units:

${\rm{Equivalent units}}\,{\rm{ = }}\,{\rm{Number}}\,{\rm{of}}\,{\rm{units \times Percentage}}\,{\rm{of}}\,{\rm{completion}}$

Equivalent unit for materials costs in ending inventory units:

${\rm{Equivalent units}}\,{\rm{ = }}\,{\rm{Number}}\,{\rm{of}}\,{\rm{units in}}\,{\rm{ending inventory}}\,{\rm{ \times Percentage}}\,{\rm{of}}\,{\rm{completion}}$

(1)

Prepare a cost of production report and identify the missing amounts for work in process—roasting department:

Working note:

The cost of production report has been prepared in the following manner:

(2)

Determine the increase or decrease in the cost per equivalent unit for direct materials and conversion between June and July:

Working note:

The increase or decrease in the cost per equivalent unit has been determined in the following manner:

:

Ans: Part 1

Part 2