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., 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

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	800
Received from Smelting Department	18480
Total units accounted for by the Rolling Department	19280
Units to be assigned cost:
Inventory in process, September 1 (80% completed)	800	0	160
Started and completed in September	16580	16580	16580
Transferred to finished goods in September	17380	16580	16740
Inventory in process, September 30 (30% complete)	1900	1900	570
Total units to be assigned cost	19280	18480	17310

COSTS	Costs
	Direct Materials	Conversion	Total
Costs per equivalent unit:
Total costs for September in Rolling Department	86856	34620
Total equivalent units	18480	17310
Cost per equivalent unit	4.70	2.00
Costs assigned to production:
Inventory in process, September 1			4896
Costs incurred in September			121476
Total costs accounted for by the Rolling Department			126372
Cost allocated to completed and partially completed units:
Inventory in process, September 1 balance			4896
To complete inventory in process, September 1	0	320	320
Cost of completed September 1 work in process			5216
Started and completed in September	77926	33160	111086
Transferred to finished goods in September			116302
Inventory in process, September 30	8930	1140	10070
Total costs assigned by the Rolling Department			126372

22503+12117 =34620

160*2= 320

16580*4.70 = 77926

16580*2 = 33160

1900*4.70 = 8930

570*2.00= 2888

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	1900
Received from Smelting Department	21300
Total units accounted for by the Rolling Department	23200
Units to be assigned cost:
Inventory in process, October 1 (30% completed)	1900	0	1330
Started and completed in September	20300	20300	20300
Transferred to finished goods in September	22200	20300	21630
Inventory in process, October 30 (40% complete)	1000	1000	400
Total units to be assigned cost	23200	21300	22030

COSTS	Costs
	Direct Materials	Conversion	Total
Costs per equivalent unit:
Total costs for October in Rolling Department	104370	46263
Total equivalent units	21300	22030
Cost per equivalent unit	4.90	2.10
Costs assigned to production:
Inventory in process, October 1			10070
Costs incurred in October			150633
Total costs accounted for by the Rolling Department			160703
Cost allocated to completed and partially completed units:
Inventory in process, October 1 balance			10070
To complete inventory in process, October 1	0	320	2793
Cost of completed October 1 work in process			12863
Started and completed in September	99470	42630	142100
Transferred to finished goods in September			154963
Inventory in process, September 30	4900	840	5740
Total costs assigned by the Rolling Department			160703

30070+16193 = 46263

1330*2.10 = 2793

20300*4.90 = 99470

20300*2.10 = 42630

1000*4.90 = 4900

400*2.10 = 840

Part 3

The cost per equivalent unit for direct materials increased from $4.60 in August to $4.70 in September to $4.90 in October. The cost per equivalent unit for conversion costs increased from 1.90 in August to $2.00 in September to $2.10 in October. These increases should be investigated for their underlying causes, and any necessary corrective actions should be taken.