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
(2,400 units, 70% completed):
	Direct materials (2,400 x $11.7)	$28,080
	Conversion (2,400 x 70% x $7.5)	12,600
		$40,680

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

Direct materials transferred from Reaction
	Department: 31,000 units at $11.4 a unit	$353,400
Direct labor		118,010
Factory overhead		113,381

During January, 30,700 units of specialty chemicals were completed. Work in Process—Filling Department on January 31 was 2,700 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)
(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

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			2400
Received from Reaction Department			31000
Total units accounted for by the Filling Department			33400
Units to be assigned costs:
		Equivalent Units
	Whole Units	Direct Materials	Conversion
Inventory in process, January 1	2400	0	720
Started and completed in January	28300	28300	28300
Transferred to finished goods in January	30700	28300	29020
Inventory in process, January 31	2700	2700	270
Total units to be assigned costs	33400	31000	29290
Cost Information
Cost per equivalent unit:
		Direct Materials	Conversion
Total costs for January in Filling Department		$ 3,53,400	$       2,31,391
Total equivalent units		31000	29290
Cost per equivalent unit		$      11.40	$             7.90
Costs assigned to production:
	Direct Materials	Conversion	Total
Inventory in process, January 1	$   28,080	$    12,600	$         40,680
Costs incurred in January	$ 3,53,400	$ 2,31,391	$       5,84,791
Total costs accounted for by the Filling Department	$ 3,81,480	$ 2,43,991	$       6,25,471
Costs allocated to completed and partially completed units:
Inventory in process, January 1 balance	$   28,080	$    12,600	$         40,680
To complete inventory in process, January 1	$          -	$      5,688	$           5,688
Cost of completed January 1 work in process	$   28,080	$    18,288	$         46,368
Started and completed in January	$ 3,22,620	$ 2,23,570	$       5,46,190
Transferred to finished goods in January	$ 3,50,700	$ 2,41,858	$       5,92,558
Inventory in process, January 31	$   30,780	$      2,133	$         32,913
Total costs assigned by the Filling Department	$ 3,81,480	$ 2,43,991	$       6,25,471
2. Journalize the entries for (1) costs transferred from Reaction to Filling and (2) the cost transferred from Filling to Finished Goods.
WIP inventory - Filling department	353400
WIP inventory - Reaction department		353400
Finished goods inventory	$ 5,92,558
WIP inventory - Filling department		$ 5,92,558
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 = 11.40-11.70 =	Decrease	$       0.30
Change in conversion cost per equivalent unit = 7.90-7.50 =	Increase	$       0.40