Question

PR 20-3B Equivalent units and related costs;cost of production report entries OBJ.2,34 2. Transferred Dover Chemical Company manufactures specialty chemicals by a series of three pro- cesses, 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. to finished goods $705,376 The balance in the account Work in Process-Filling was as follows on January 1 Excel (Continued)

Answer 1

Ans) 1) Cost of Production Report-

Units	Whole Units	Equivalent Units	Equivalent Units
		Direct Materials	Conversion
Units Charged to production
Inventory Jan 1st	3400
Received from Reaction Dep	52300
Total units accumulated for the filling dep	55700
Units to be assigned cost
Inventory 1st Jan (3400 units)	3400		1360
Production in jan (53000-3400)	49600	49600	49600
Transferred to finished goods in Jan	53000	49600	50960
Inventory in process in Jan 31st	2700	2700	810
Total units to be assigned cost	55700	52300	51770

Costs	Direct Materials	Conversions	Total
Cost per equivalent unit-
Total cost for Filling Dep in Jan (a)	496850	196726
Total equivalent units (b)	52300	51770
Cost per equivalent unit (a/b)	9.5	3.8
Cost assigned to production-
Inventory in process 1st jan			40,528
Cost incurred in Jan			693,576
Total cost accumulated for by the Filling Dep			734,104
Cost allocated to completed & partially completed units;
Inventory in process 1st Jan			40,528
To complete inventory in process 1st Jan (1360 * 3.80)		5168	5168
Cost of completed work in process for jan			45,696
Started & Completed Production in Jan	(49600*9.5)471200	(49600*3.8)188480	659,680
Transferred to moulding dep	471200	188480	705,376
Inventory in process Jan 31	(2700*9.5)25650	(810*3.8)3078	28728
Total cost assigned by the filling dep			734,104

2) Recording entries-

Journal Entries
Account	Debit	Credit
Work in process Filling Dep a/c	496850
To Work in process Reacting Dep a/c		496850
(being record the tranfer of cost)
Work in process Filling Dep a/c	196726
To Wages Payable a/c		101560
To Factory Overhead a/c		95166
Being transfer of cost)
Finished goods a/c	705376
To work in process Filling Dep a/c		705376
(being tranfer of cost of finished goods)

3) Change in equivalent cost per unit for the two months-

Change in Direct Materials cost per unit= 9.5-9.58=-.08 (decrease)

Change in Conversion cost per unit= 3.9-3.8 = .01 (increase)

4) Uses of the cost of production report-

The report states the total production and total cost for a certain period which helps in further financial statements. Its shows the accumulated costs for the given period in detailed analysis in terms of direct materials cost and conversion cost. This type of report helps in proper recording of transactions and also heps the management team to take crucial decisions when needed.

There is a decrease in the direct materials cost per unit because of the decrease in the material cost in the month of January in the same way there is an increase in the Conversion cost per equivalent unit because the conversion cost increases in the month of January.