Question

The Cutting Department of Karachi Carpet Company provides the following data for January. Assume that all materials are added at the beginning of the process.

Work in process, January 1, 1,400 units, 75% completed $ 22,960*

*Direct materials (1,400 × $12.65) $ 17,710

Conversion (1,400 × 75% × $5.00)   $ 5,250

Total $ 22,960

Materials added during January from Weaving Department, 58,000 units $ 742,400

Direct labor for January $ 134,550

Factory overhead for January $ 151,611

Goods finished during January (includes goods in process, January 1), 56,200 units

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Work in process, January 31, 3,200 units, 30% completed

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A. Prepare a cost of production report for the Cutting Department.

B. Compute and evaluate the change in the costs per equivalent unit for direct materials and

conversion from the previous month (December).

Answer 1

Units Units Charged to the production Inventory in process, Jan 1st Received from weaving department Total Units accounted for by cutting department 1400 58000 59400 Paticulars Inventory in process, Jan 1st Started & Completed in Jan (56200-1400) Transferred to finished goods in Jan Inventory in process, Jan 31st (59400-56200) Total Units assigned to costs Equivalent Units Whole Units Direct Materials Conversion 1400 0 350 54800 54800 54800 56200 3200 3200 960 58000 56110 Cost Information Particulars Total Cost for Jan in Cutting Department Total Equivalent Units Cost per Equivalent Units Direct Materials Conversion 742400 286161 58000 56110 12.8 5.1

Cost Assigned to production Particulars Inventory in process, Jan 1st Costs Incurred in Jan Total Costs accounted Direct Materials 17710 742400 760110 Conversion 5250 286161 291411 Total 22960 1028561 1051521 5250 1785 22960 1785 24745 Costs Allocated to completed & Partially Completed units Inventory in process, Jan 1st Balance 17710 Complete inventory in Process, Jan 1st 0 Cost Completed Jan 1st WIP 17710 Started & Completed in Jan 701440 Transferred to finished goods in Jan Inventory in process, Jan 31st 40960 Total Cost assigned for cutting department 7035 279480 980920 1005665 4896 45856 1051521 b) Increase/Decrease Amount Particulars Change in Direct Materials cost per equivalent unit (12.80-12.65) Change in Conversion cost per equivalent unit (5.10-5.00) Increase 0.15 Increase 0.1