Question

to oril, 318 record the costs of processing soup, which 15 are entered from the cooking process at Hearty Soup Co. uses a process cost system to record the costs of process requires the cooking and filling processes. Materials are entered from the cook the beginning of the filling process. The inventory of Work in Process-Filling on debits to the account during April were as follows: Bal., 800 units, 30% completed: Direct materials (800 x $4.30) $ 3,440 Conversion (800 x 30% x $1.75) 420 $ 3,860 ATE From Cooking Department, 7,800 units $34,320 Direct labor 8,562 Factory overhead 6,387 During April, 800 units in process on April 1 were completed, and of the 7,800 units entering the department, all were completed except 550 units that were 90% completed. Charges to Work in Process—Filling for May were as follows: From Cooking Department, 9,600 units $44,160 Direct labor 12,042 Factory overhead 6,878 During May, the units in process at the beginning of the month were completed, and of the 9,600 units entering the department, all were completed except 300 units that were 35% completed. Instructions 1. Enter the balance as of April 1, in a four-column account for Work in Process-Filling. Record the debits and the credits in the account for April. 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 April, and (D) work in process inventory. 2. Provide the same information for May by recording the May transactions in the four-column work in process account. Construct a cost of production report, and present the May com- putations (A through D) listed in part (1). Comment on the change in costs per equivalent unit for March through May for direct materials and conversion costs.

Answer 1

Part 1

Step for solution
Step 1	Equivalent Units of production = Physical units multiplied by % of competition
Step 2	Calculate total cost to be accounted for
Step 3	Cost per Equivalent Unit = Cost incurred during Month / Equivalent Units of production
Step 4	Cost assigned to units transferred out = Cost in beginning WIP + Cost incurred for complete beginning WIP + Cost of units in Started and completed
Step 5	Cost assigned to units ending work in progress = equivalent units in ending WIP inventory * Cost per Equivalent Unit
For direct material 100% unit completed in the previous period. It means the remaining 0% completed in this month.
For conversion cost 30% unit completed in the previous period. It means the remaining 70% completed in this month.

Hearty Soup Company
Filling Department production Report
First in First out (FIFO) Method
Month ended April 30
Summary of Physical units
Units in beginning WIP inventory			800
Units started during month			7800
Total unit to be accounted for			8600
Units completed and transferred out (8600-550)			8050
Units in ending WIP inventory			550
Total unit accounted for			8600
Equivalent Units of production
Particulars	Physical units	Direct material		Conversion Cost
		%	units	%	units
units in beginning WIP inventory	800	0%	0	70%	560
Units in Started and completed (8050-800)	7250	100%	7250	100%	7250
units in ending WIP inventory	550	100%	550	90%	495
Equivalent Units of production			7800		8305
Summary of cost to be accounted
	Direct material	Conversion Cost	Total
Cost in beginning WIP	$           3,440	$              420	$          3,860
Cost incurred during Month (Add)	$         34,320	$        14,949	$        49,269
total cost to be accounted for	$         37,760	$        15,369	$        53,129
cost per Equivalent Unit
Cost incurred during Month	$         34,320	$        14,949
Equivalent Units of production	7800	8305
Cost per Equivalent Unit	$              4.40	$            1.80	$            6.20
Assign costs to units transferred out and units in ending WIP inventory
cost assigned to units transferred out
Direct material	$           3,440
Conversion Cost	$               420
Cost in beginning WIP		$          3,860
Direct material (0*4.4)	$                  -
Conversion Cost (560*1.8)	$           1,008
Cost incurred for complete beginning WIP		$          1,008
Direct material (7250*4.4)	$         31,900
Conversion Cost (7250*1.8)	$         13,050
Cost of units in Started and completed		$        44,950
cost assigned to units transferred out		$        49,818
cost assigned to units ending work in progress
Direct material (550*4.4)	$           2,420
Conversion Cost (495*1.8)	$               891
cost assigned to units ending work in progress		$          3,311
Total cost assigned		$        53,129

Work in progress inventory - Filling
					Balance
Date		Item	Debit	Credit	Debit	Credit
April	1	Beginning WIP balance			$    3,860
	30	Direct materials	$              34,320		$ 38,180
	30	Direct labor	$                8,562		$ 46,742
	30	Factory overhead	$                6,387		$ 53,129
	30	Goods transferred to finished goods		$ 49,818
	30	Ending WIP balance			$    3,311

Part 2

Hearty Soup Company Filling Department production Report First in First out (FIFO) Method Month ended May 31 Summary of Physical units Units in beginning WIP inventory Units started during month Total unit to be accounted for Units completed and transferred out (10150-300) Units in ending WIP inventory Total unit accounted for 550 9600 10150 9850 300 10150 Equivalent Units of production % % Particulars units in beginning WIP inventory Units in Started and completed (9850-550) units in ending WIP inventory Equivalent Units of production Physical units 550 9300 300 Direct material units 0% 0 100% 9300 100% 300 9600 Conversion Cost units 10% 55 100% 9300 35% 105 9460 Summary of cost to be accounted Coosts Direct material $ 2,420 $ 44,160 Conversion Cost Total $ 891 $ 3,311 $ 18,920 $ 63,080 Cost in beginning WIP Cost incurred during Month (Add) 3,312 cron 100 101

Summary of cost to be accounted Cost in beginning WIP Cost incurred during Month (Add) total cost to be accounted for Direct Conversion material Cost Total $ 2,420 $ 891 $ 3,311 $ 44,160 $ 18,920 $ 63,080 $ 46,580 $ 19,811 $ 66,391 $ $ cost per Equivalent Unit Cost incurred during Month Equivalent Units of production Cost per Equivalent Unit 44,160 9600 4.60 18,920 9460 2.00 $ $ $ 6.60 Assign costs to units transferred out and units in ending WIP inventory cost assigned to units transferred out Direct material $ 2,420 Conversion Cost $ 891 Cost in beginning WIP $ 3,311 Direct material (0*4.6) Conversion Cost (55*2) Cost incurred for complete beginning WIP $ 110 $ 110 $ $ 42,780 18,600 Direct material (9300*4.6) Conversion Cost (9300*2) Cost of units in Started and completed cost assigned to units transferred out $ $ 61,380 64,801

$ $ cost per Equivalent Unit Cost incurred during Month Equivalent Units of production Cost per Equivalent Unit 44,160 9600 4.60 18,920 9460 2.00 $ $ $ 6.60 Assign costs to units transferred out and units in ending WIP inventory cost assigned to units transferred out Direct material $ 2,420 Conversion Cost $ 891 Cost in beginning WIP $ 3,311 Direct material (0*4.6) Conversion Cost (55*2) Cost incurred for complete beginning WIP $ $ - 110 $ 110 $ $ 42,780 18,600 Direct material (9300*4.6) Conversion Cost (9300*2) Cost of units in Started and completed cost assigned to units transferred out $ $ 61,380 64,801 cost assigned to units ending work in progress Direct material (300*4.6) Conversion Cost (105*2) cost assigned to units ending work in progress Total cost assigned $ $ 1,380 210 $ $ 1,590 66,391

Work in progress inventory - Filling
					Balance
Date		Item	Debit	Credit	Debit	Credit
May	1	Beginning WIP balance			$    3,311
	31	Direct materials	$              44,160		$ 47,471
	31	Direct labor	$              12,042		$ 59,513
	31	Factory overhead	$                6,878		$ 66,391
	31	Goods transferred to finished goods		$ 64,801
	31	Ending WIP balance			$    1,590

Part 3

	Direct material	Conversion Cost
Cost per equivalent unit in May	$       4.60	$       2.00
Cost per equivalent unit in March (less)	$       4.30	$       1.75
Increase (decrease) in cost per equivalent unit	$       0.30	$       0.25
Direct material cost per unit is increased by $0.30 during the two months.
Conversion cost per unit is increased by $0.25 during the two months.