Question

Work in Process Account Data for Two Months; Cost of Production Reports 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., 1,200 units, 60% completed: Direct materials (1,200 x $5) Conversion (1,200 x 60% x $2.1) $ 6,000 1,512 $ 7,512 From Smelting Department, 27,240 units $138,924 Direct labor 37,237 Factory overhead 20,051 During September, 1,200 units in process on September 1 were completed, and of the 27,240 units entering the department, all were completed except 2,100 units that were 20% completed. Charges to Work in Process-Rolling for October were as follows: From Smelting Department, 31,300 units Direct labor $ 165,890 48,830 26,288 Factory overhead During October, the units in process at the beginning of the month were completed, and of the 31,300 units entering the department, all were completed except 1,600 units that were 80% 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.

Answer 1

Part 1

PITTSBURGH ALUMINUM COMPANY Cost of Production Report—Rolling Department For the Month Ended September 30
UNITS		Equivalent Units
	Whole Unit	Direct Materials	Conversion
Units charged to production:
Inventory in process, September 1	1200
Received from Smelting Department	27240
Total units accounted for by the Rolling Department	28440
Units to be assigned cost:
Inventory in process, September 1 (60% completed)	1200	0	480
Started and completed in September	25140	25140	25140
Transferred to finished goods in September	26340	25140	25620
Inventory in process, September 30 (20% complete)	2100	2100	420
Total units to be assigned cost	28440	27240	26040

COSTS	Costs
	Direct Materials	Conversion	Total
Costs per equivalent unit:
Total costs for September in Rolling Department	138924	57288
Total equivalent units	27240	26040
Cost per equivalent unit	5.10	2.20
Costs assigned to production:
Inventory in process, September 1			7512
Costs incurred in September			196212
Total costs accounted for by the Rolling Department			203724
Cost allocated to completed and partially completed units:
Inventory in process, September 1 balance			7512
To complete inventory in process, September 1	0	1056	1056
Cost of completed September 1 work in process			8568
Started and completed in September	128214	55308	183522
Transferred to finished goods in September			192090
Inventory in process, September 30	9690	924	11634
Total costs assigned by the Rolling Department			203724

37237+20051 =57288

480*2.20= 1056

25140*5.10 = 128214

25140*2.2 = 55308

2100*4.70 = 9690

420*2.20= 924

Part 2

Date	Item	Debit	Credit	Debit	Credit
October 1	Balance			11634
October 31	Smelting Dept 31300 units at $5.3	165890		177524
October 31	Direct labor	48830		226354
October 31	Factory overhead	26288		252642
October 31	Finished goods
October 31	Bal., 1600 units, 80% completed

PITTSBURGH ALUMINUM COMPANY Cost of Production Report—Rolling Department For the Month Ended October 31
UNITS		Equivalent Units
	Whole Unit	Direct Materials	Conversion
Units charged to production:
Inventory in process, October 1	2100
Received from Smelting Department	31300
Total units accounted for by the Rolling Department	33400
Units to be assigned cost:
Inventory in process, October 1 (20% completed)	2100	0	1680
Started and completed in September	29700	29700	29700
Transferred to finished goods in September	31800	29700	31380
Inventory in process, October 30 (80% complete)	1600	1600	1280
Total units to be assigned cost	33400	31300	32660

COSTS	Costs
	Direct Materials	Conversion	Total
Costs per equivalent unit:
Total costs for October in Rolling Department	165890	75118
Total equivalent units	31300	32660
Cost per equivalent unit	5.30	2.30
Costs assigned to production:
Inventory in process, October 1			11634
Costs incurred in October			241008
Total costs accounted for by the Rolling Department			252642
Cost allocated to completed and partially completed units:
Inventory in process, October 1 balance			11634
To complete inventory in process, October 1	0	3864	3864
Cost of completed October 1 work in process			15498
Started and completed in September	157410	68310	225720
Transferred to finished goods in September			241218
Inventory in process, September 30	8480	2944	11424
Total costs assigned by the Rolling Department			252642

48830+26288 = 75118

1680*2.30 = 3864

29700*5.30 = 157410

29700*2.30 = 68310

1600*5.30 = 8480

1280*2.30 = 2944

Part 3

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