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
(1,900 units, 40% completed):
	Direct materials (1,900 x $16.1)	$30,590
	Conversion (1,900 x 40% x $10.5)	7,980
		$38,570

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

Direct materials transferred from Reaction
	Department: 24,500 units at $15.9 a unit	$389,550
Direct labor		140,070
Factory overhead		134,574

During January, 24,300 units of specialty chemicals were completed. Work in Process—Filling Department on January 31 was 2,100 units, 90% 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. If an amount box does not require an entry, leave it blank.

(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. 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   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

Part 1

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			1900
Received from Reaction Department			24500
Total units accounted for by the Filling Department			26400
Units to be assigned costs:
	Equivalent units
	Whole units	Direct materials	Conversion
Inventory in process, January 1	1900	0	1140
Started and completed in January	22400	22400	22400
Transferred to finished goods in January	24300	22400	23540
Inventory in process, January 31	2100	2100	1890
Total units to be assigned cost	26400	24500	25430

1900*(1-40%) =1960

24300-1900 = 33000

2100*90% = 1890

Cost information

Costs per equivalent unit:
		Direct materials	Conversion
Total costs for January in Filling Department		389550	274644
Total equivalent units		24500	25430
Cost per equivalent unit		15.90	10.80
Costs charged to production:
	Direct materials	Conversion	Total
Inventory in process, January 1			38570
Costs incurred in January			664194
Total costs accounted for by the Filling Department			702764
Cost allocated to completed and partially completed units:
Inventory in process, January 1 balance			38570
To complete inventory in process, January 1	0	12312	12312
Cost of completed January 1 work in process			50882
Started and completed in January	356160	241920	598080
Transferred to finished goods in January			648962
Inventory in process, January 31	33390	20412	53802
Total costs assigned by the Filling Department			702764

1140*10.80 = 12312

22400*15.90 =356160

22400*10.80 =241920

2100*15.90 =33390

1890*10.80 = 20412

Part 2

No.	Account titles and explanation	Debit	Credit
1	Work in Process—Filling Department	389550
	Work in Process—Reaction Department		389550
2	Finished Goods	648962
	Work in Process—Filling Department		648962

Part 3

Change in Direct materials cost per equivalent unit	Decrease	$0.20
Change in Conversion cost per equivalent unit	Increase	$0.30

16.10-15.90 = 0.20

10.50-10.80 = 0.20

Part 4

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.