Question

INDTAP s Cost Systems G Google Password Enter your passwor "helen.nguyen0112 Arabica Highland Coffee Company roasts and packs coffee beans. The process begins by placing coffee beans into the Roasting Department. From the Roasting Department, coffee beans are then transferred to the Packing Department. The following is a partial work in process account of the Roasting Department at July 31: ACCOUNT Work In Process --Roasting Department ACCOUNT NO Balance Date Item Debit Credit Debit Credit July 1 Bal., 30,000 units, 10% completed 31 Direct materials, 155,000 units 31 Direct labor 31 Factory overhead 31 Goods transferred, 149,000 units 31 Bal., 2 units, 45% completed 620,000 90,000 33,272 121,800 741,800 831,800 865,072 Instructions 1. Prepare a cost of production report and identify the missing amounts for Work in Process Roasting Department Answer + 2. Assuming that the July I work in process inventory includes $119.400 of direct materials, determine the increase or decrease in the cost per equivalent unit for direct materials and conversion between June and July

Answer 1

1)

ARABICA HIGHLAND COFFEE COMPANY COST OF PRODUCTION REPORT-CUTTING DEPARTMENT (FIFO METHOD) FOR THE MONTH DEPARTMENT OF JULY 31
Units charged to production
Inventory in process ,Jan 1			30000
Received from Material storeroom			155000
Total units accounted for by the roasting department			185000
	WHOLE UNITS	EQUIVALENT UNITS
		MATERIAL	CONVERSION
Inventory in process,Jul 1	30000	0	30000(1-.10)= 27000
Started and completed (149000-30000)	119000	119000	119000
Transferred to packing department in July	149000	119000	146000
Inventory in process ,July 31	36000	36000*100%=36000	36000*45%= 16200
Total units to be assigned cost	185000	155000	162200
Cost per equivalent unit
		MATERIAL	CONVERSION
Total cost for July		620000	90000+33272=123272
Total equivalent units		155000	162200
Cost per equivalent unit		620000/155000= 4	123272/162200= .76
Cost accounted for
	Direct material	Conversion	Total
Inventory in process ,Jul 1			121800
Cost incurred in Jul			620000+123272= 743272
The total cost accounted for by the roasting department			865072
Cost allocated to units completed and in process at end
Inventory in process on Jul 1			121800
To complete inventory in process Jul 1	0	27000*.76= 20520	20520
cost of started and completed	119000*4= 476000	119000*.76= 90440	566440
Transferred to finished goods inventory during July			708760
Inventory in process Jul 31	36000*4= 144000	16200*.76= 12312	156312
Total cost assigned by roasting department			865072

Note:

Under FIFO ,units started first are transferred out .so out of units completed (149000 units) ,30000 units is from beginning work in process and remaining is from current period .

Since coffee beans are added at beginning of production ,they are100% complete as to material;

Ending work in process= 30000beginning +started 155000 - 149000 transferred out = 36000

2)

	Increase/(decrease)	Beginning(June)	July	Amount
Change in direct material cost per equivalent unit	Increase	119400/30000= 3.98	4	4-3.98= .02
Change in conversion cost per equivalent unit	Decrease	2400/3000=.80	.76	.76-.80= -.04

Out of total beginning work in process cost of 121800 ,119400 is for direct material then conversion cost = 121800-119400= 2400

Also beginning work in process is 10% completed in respect of conversion cost.so equivalent unit for conversion cost at beginning =30000*10%= 3000