Question

BDB Company manufactures its one product by a process that requires two departments. The production starts in Department A and is completed in Department B. Direct materials are added at the beginning of the process in Department A. Additional direct materials are added when the process is 50% complete in Department B. Conversion costs are incurred proportionally throughout the production processes in both departments.

On April 1, Department A had 500 units in Work-in-Process estimated to be 30% complete for conversion; Department B had 300 units in Work-in-Process estimated to be 40% complete for conversion. During April, Department A started 2,000 units and completed 2,100 units; Department B completed 2,000 units. The ending Work-in-Process Inventory on April 30 in Department A is estimated to be 50% complete for conversion, and the ending Work-in-Process Inventory in Department B is estimated to be 70% complete for conversion.

The cost sheet for Department A shows that the units in the beginning Work-in-Process Inventory had $2,750 in direct materials costs and $1,494 in conversion costs. The production costs incurred in April were $18,000 for direct materials and $21,000 for conversion. Department B’s beginning Work-in-Process Inventory on April 1 was $6,100, of which $4,200 was transferred-in costs; it incurred $37,920 in direct materials costs and $24,434 in conversion costs in April.

BDB Company uses the weighted-average method for Departments A and B.

Required:

1. Prepare a production cost report for Department A.

2. Prepare a production cost report for Department B.

Answer 1

SOLUTION

1. Computation of Equivalent unit of Production - Department A

Particulars	Physical Units	Material	Conversion
Unit completed & Transferred out	2,100	2,100	2,100
Closing WIP: (500 + 2000 - 2100)	400
Material (100%)		400
Conversion (50%)			200
Equivalent units of production	2,500	2,500	2,300

Computation of Cost per equivalent unit of Production - Department A

Particulars	Material	Conversion
Opening WIP	2,750	1,494
Cost Added during April	18,000	21,000
Total cost to be accounted for (A)	20,750	22,494
Equivalent units of production (B)	2,500	2,300
Cost per Equivalent unit (A/B)	8.30	9.78

Computation of Cost of ending WIP and units completed & transferred out - Department A

Particulars	Material	Conversion	Total
Equivalent unit of Ending WIP	400	200
Cost per equivalent unit	8.30	9.78
Cost of Ending WIP (Equivalent unit * Cost per equivalent unit)	3,320	1,956	5,276
Units completed and transferred	2,100	2,100
Cost of units completed & Transferred (Unit completed * cost per equivalent unit)	17,430	20,538	37,968

Production Cost Report - Department A

Particulars	Amount ($)
Costs to be accounted for:
Cost of beginning WIP inventory ($2,750 + $1,494)	4,244
Cost added to production ($18,000 + $21,000)	39,000
Total Cost to be accounted for	43,244
Costs accounted for as follows:
Cost of unit transferred out	37,968
WIP April 30:
Material	3,320
Converison	1,956
Total cost accounted for	43,244

2. Computation of Equivalent unit of Production - Department B

Particulars	Physical Units	Prior Department Cost	Material	Conversion
Unit completed & Transferred out	2,000	2,000	2,000	2,000
Closing WIP: (300 + 2100 - 2000)	400
Prior deparment cost (100%)		400
Material (100%)			400
Conversion (70%)				280
Equivalent units of production	2,400	2,400	2,400	2,280

Computation of Cost per equivalent unit of Production - Department B

Particulars	Prior Department Cost	Material	Conversion
Opening WIP	4,200	0	1,900
Cost Added during April	37,968	37,920	24,434
Total cost to be accounted for	42,168	37,920	26,334
Equivalent units of production	2,400	2,400	2,280
Cost per Equivalent unit	17.57	15.80	11.55

Computation of Cost of ending WIP and units completed & transferred out - Department B

Particulars	Prior Department Cost	Material	Conversion	Total
Equivalent unit of Ending WIP	400	400	280
Cost per equivalent unit	17.57	15.80	11.55
Cost of Ending WIP (Equivalent unit * Cost per equivalent unit)	7,028	6,320	3,234	16,582
Units completed and transferred	2,000	2,000	2,000
Cost of units completed & Transferred (Unit completed * cost per equivalent unit)	35,140	31,600	23,100	89,840

Production Cost Report - Department B

Particulars	Amount ($)
Costs to be accounted for:
Cost of beginning WIP inventory ($4,200 + $1,900)	6,100
Prior department cost transferred In	37,968
Cost added to production (37,920+24,434)	62,354
Total Cost to be accounted for	106,422
Costs accounted for as follows:
Cost of unit completed	89,840
WIP April 30:
Prior Department Cost	7,028
Material	6,320
Conversion	3,234
Total Cost accounted for	106,422