Question

Pittsburgh Aluminum Company uses a process cost system to record the costs of manufacturing rolled aluminum, which consists of the smelting and rolling processes. Materials are entered from smelting at the beginning of the rolling process. The inventory of Work in Process—Rolling on September 1 and debits to the account during September were as follows:

Bal., 800 units, 80% completed:
	Direct materials (800 x $4.6)	$ 3,680
	Conversion (800 x 80% x $1.9)	1,216
		$ 4,896
From Smelting Department, 18,480 units		$86,856
Direct labor		22,503
Factory overhead		12,117

During September, 800 units in process on September 1 were completed, and of the 18,480 units entering the department, all were completed except 1,900 units that were 30% completed. Charges to Work in Process—Rolling for October were as follows:

From Smelting Department, 21,300 units	$104,370
Direct labor	30,070
Factory overhead	16,193

During October, the units in process at the beginning of the month were completed, and of the 21,300 units entering the department, all were completed except 1,000 units that were 40% completed.

Required:

1. Enter the balance as of September 1 in a four-column account for Work in Process—Rolling. Record the debits and the credits in the account for September. Construct a cost of production report and present computations for determining (a) equivalent units of production for materials and conversion, (b) costs per equivalent unit, (c) cost of goods finished, differentiating between units started in the prior period and units started and finished in September, and (d) work in process inventory. If an amount box does not require an entry, leave it blank.

2. Provide the same information for October by recording the October transactions in the four-column work in process account. Construct a cost of production report, and present the October computations (a through d) listed in part (1). If an amount box does not require an entry, leave it blank.

ACCOUNT	Work in Process-Rolling Department				ACCOUNT NO.
					Balance
DATE	ITEM	POST. REF.	DEBIT	CREDIT	DEBIT	CREDIT
October 1	Balance
October 31	Smelting Dept., 21,300 units at $4.9
October 31	Direct labor
October 31	Factory overhead
October 31	Finished goods
October 31	Bal., 1,000 units, 40% completed

If an amount is zero, enter in a zero "0". Round cost per unit answers to the nearest cent.

Pittsburgh Aluminum Company Cost of Production Report-Rolling Department For the Month Ended October 31
	Whole Units	Equivalent Units
Units		Direct Materials (a)	Conversion (a)
Units charged to production:
Inventory in process, October 1
Received from Smelting Department
Total units accounted for by the Rolling Department
Units to be assigned costs:
Inventory in process, October 1
Started and completed in October
Transferred to finished goods in October
Inventory in process, October 31
Total units to be assigned costs

	Costs
Costs		Direct Materials				Conversion				Total Costs
Cost per equivalent unit:
Total costs for October in Rolling Department		$				$
Total equivalent units
Cost per equivalent unit (b)		$				$
Costs assigned to production:
Inventory in process, October 1										$
Costs incurred in October
Total costs accounted for by the Rolling Department										$
Costs allocated to completed and partially completed units:
Inventory in process, October 1 balance (c)										$
To complete inventory in process, October 1 (c)		$				$
Cost of completed October 1 work in process										$
Started and completed in October (c)
Transferred to finished goods in October (c)										$
Inventory in process, October 31 (d)
Total costs assigned by the Rolling Department										$

3. The cost per equivalent unit for direct materials increased  from August to October. The cost per equivalent unit for conversion costs increased  from August to October. These changes should  be investigated for their underlying causes, and any necessary corrective actions should be taken.

Answer 1

Account Work in Process - Rolling Deparment POST REF DEBIT CREDIT Date Sept. 1 Sept 30 Sept 30 Sept 30 Sept 30 Sept 30 ITEM Bal. 800 Units 80% Completed Smelting Dept, 18,480 units at $4.70 Direct labor Factory Overhead Finished goods (from Cost Sheet) Bal. 1,900 Units 30% Completed 86,856 22,503 12,117 ACCOUNT NO BALANCE DEBIT CREDIT 4,896 91,752 114,255 126,372 10,070 10,070 116,302

Pittsburgh Aluminum Company Cost of Production Report - Rolling Department For the Month Ended September 30 Whole Units Equivalent Units Units Direct Materials (a) Conversion (a) Units charged to production: Inventory in process, September 1 800 Received from Smelting Department 18,480 Total units accounted for by the Rolling department 19,280 Units to be assigned costs: Inventory in process, September 1 (800 x 20%) Started and completed in September (17,380 - 800) Transferred to finished goods in September (19,280 - 1,900) Inventory in process, September 30 (1,900 x 100%, 1,900 30%) Total units to be assigned costs 800 16,580 17,380 1,900 19,280 16,580 16,580 1,900 18,480 160 16,580 16,740 570 17,310

COSTS Conversion Direct Material Total COSTS Cost per equivalent unit: A. Total costs for september in Rolling Department B. Total Equivalent Units C. Cost per equivalent Unit (A/B) 86,856 $ 18,480 4.70 $ 34,620 17,310 2.00 Cost Assigned to production: Inventory in process, September 1 Cost incurred in September (86,856 + 34,620) Total cost accounted for by the Rolling department 4,896 121,476 126,372 $ 320 320 $ 4,896 320 5,216 - Cost allocated to complete and partially completed units: Inventory in Process, September 1 balance To complete inventory in process, September 1 (160 x 2.00) Cost of completed September 1 Work in Process Started and completed in September Direct Material (16,580 x 4.70), Conversion (16,580 x 2.00) Transferred to finished goods in September Inventory in Process, September 30 Direct Material (1,900 x 4.70), Conversion (570 x 2.00) Total Cost assigned by the Rolling department 77,926 33,160 111,086 116,302 8,930 1,140 10,070 126,372

Account Work in Process - Rolling Deparment POST REF DEBIT CREDIT DEBIT Date Oct.1 Oct.31 Oct.31 Oct.31 Oct.31 Oct.31 ITEM Balance Smelting Dept, 21,300 units at $4.9 Direct labor Factory Overhead Finished goods (from Cost Sheet) Bal. 1,000 Units 40% Completed 104,370 30,070 16,193 ACCOUNT NO BALANCE CREDIT 10,070 114,440 144,510 160,703 5,740 5,740 154,963

Pittsburgh Aluminum Company Cost of Production Report - Rolling Department For the Month Ended October 31 Whole Units Equivalent Units Direct Mate Direct Materials (a) Conversion (a) Units Units charged to production: Inventory in process, October 1 Received from Smelting Department Total units accounted for by the Rolling department 1,900 21,300 23,200 Units to be assigned costs: Inventory in process, October 1 (1,900 x 70%) Started and completed in October (22,200 - 1,900) Transferred to finished goods in October (23,200 -1,000) Inventory in process, October 31 (1,000 100%, 1,000 x 40%) Total units to be assigned costs 1,900 20,300 22,200 20,300 20,300 1,000 21,300 1,330 20,300 21,630 400 22,030 1,000 23,200

COSTS Conversion Direct Material Total COSTS Cost per equivalent unit: A. Total costs for October in Rolling Department B. Total Equivalent Units C. Cost per equivalent Unit (A/B) $ 104,370 21,300 4.90 46,263 22,030 2.10 $ T T $ Cost Assigned to production: Inventory in process, October 1 Cost incurred in September (104,370 + 46,263) Total cost accounted for by the Rolling department 10,070 150,633 160,703 $ - $ 2,793 2,793 10,070 2,793 12,863 $ 99,470 42,630 Cost allocated to complete and partially completed units: Inventory in Process, October 1 balance To complete inventory in process, October 1 (1,330 x 2.10 Cost of completed October 1 Work in Process Started and completed in October Direct Material (20,300 x 4.90), Conversion (20,300 x 2.10) Transferred to finished goods in October Inventory in Process, October 31 Direct Material (1,000 ~ 4.90), Conversion (400 x 2.10) Total Cost assigned by the Rolling department Notes: Conversion = (Direct labor + Factory Overhead) Beginning Conversion % = 100% - Already completed in previous month 142,100 154,963 4,900 840 5,740 160,703

The cost per equivalent unit for direct materials increased from August to October. The cost per equivalent unit for conversion costs increased from August to October. These changes should be investigated for their underlying causes, and any necessary corrective actions should be taken.