Question

Actual Process Costing (15.points) Solutions, Inc. buys bulk liquid soap, packs it in unit containers and sells to residential users. The packaging is done two distinct steps, Filling/Capping followed by Cleaning/Inspection. These two steps are carried out in different departments. Solutions uses an actual process costing system There were no beginning inventories on January 1, 2018 in the Filling/Capping department. During January 2018, direct materials worth $56,500 and conversion costs of $24,000 were consumed in the Filling/Capping department and the entire quantity of 40,000 filled containers was transferred to the Cleaning/Inspection department. There was also no ending inventory in the Filling/Carring department as of January 31, 2018 No direct materials are added in the Cleaning/Inspection department and conversion costs are incurred evenly throughout the process in the department. The Cleaning and Inspection department had a beginning inventory of 5,000 containers as of January 1, 2018, with the following value: transferred in costs (100%) = $9,500 and conversion costs (60% complete) = $2,550. The ending inventory (as of January 31, 2018) of 10,000 containers in the Cleaning/Inspection department was 70% complete for conversion in that department. Total conversion costs incurred in the Cleaning/Inspection department during January 2018 were $31,050. Assume that there was no spoilage in either department Solution, Inc. uses the Weighted Average method to value its inventory. Required: 1) How many containers were transferred from Cleaning/inspeltion into Finished Goods during January 2018? 2) What is the transferred-in-cost per EU for the Cleaning/Inspection department? 3) What is the conversion cost per EU for the Cleaning/Inspection department? 4) What was the total cost of the containers transferred to finished goods inventory 5) What was the cost of the ending work-in-process inventory in the Cleaning/Inspection department as of January 31, 2018? (Show your work in the space below or on your scratch paper to get partial credit.)

Answer 1

1) Containers transferred to Finished goods Opening WIP Add: Units received from Filling /Capping dept 5,000 40,000 45,000 10,000 35,000 Closing WIP Containers transferred to Finished goods 2) Transferred in cost per EU $2.00 3) Conversion cost per EU $0.80 4) Total cost of containers transferred to FG $98,000 5) Cost of Ending Work in process $25,600 100% Solutions Inc. Cost of Production Report - Cleaning /Inspection Department Weighted Average Method % EUP % EUP- Units Transferred- Transferred Conversion Conversion in in Units completed and transferred 35,000 100% 35,000 35,000 Ending Work in process 10,000 100% 10,000 70% 7,000 Equivalent Units of Production 45,000 45,000 42,000 Transferred Cost per Equivalent unit of production in Conversion Beginning WIP $9,500 $2,550 Cost added during the month $80,500 $31,050 Totals costs Costs $90,000 costs $33,600 Divided by equivalent units of production EUP 45,000 EUP 42,000 Cost per equivalent unit (rounded to 2 decimals) $2.000 $0.80 Total Costs to Account for: Beginning WIP $12,050 Costs added during the month $111,550 Total costs to account for $123,600 Total costs accounted for $123,600 Difference due to rounding off $0 Cost Assignment and Reconciliation: Cost of units completed and transferred out EUP Cost per EUP Total Cost Transferred-in 35,000 $2.00 $70,000 Conversion 35,000 $0.80 $28,000 Total costs transferred out to Department 1 $98,000 Cost of ending work in process Transferred-in 10,000 $2.000 $20,000 Conversion 7,000 $0.80 $5,600 Total cost of ending work in process $25,600 Total cost accounted for $123,600