Question

Cost of Production and Journal Entries

AccuBlade Castings Inc. casts blades for turbine engines. Within the Casting Department, alloy is first melted in a crucible, then poured into molds to produce the castings. On May 1, there were 700 pounds of alloy in process, which were 60% complete as to conversion. The Work in Process balance for these 700 pounds was $85,820, determined as follows:

Direct materials (700 x $110)	$77,000
Conversion (700 x 60% x $21)	8,820
	$85,820

During May, the Casting Department was charged $699,600 for 6,600 pounds of alloy and $52,640 for direct labor. Factory overhead is applied to the department at a rate of 150% of direct labor. The department transferred out 6,800 pounds of finished castings to the Machining Department. The May 31 inventory in process was 40% complete as to conversion.

a1. Prepare the May journal entry for the Casting Department for the materials charged to production.

	Cash Factory Overhead-Casting Department Factory Overhead Materials-Alloy Work in Process-Casting Department Work in Process-Machining Department
	Cash Factory Overhead Materials-Alloy Wages Payable Work in Process-Casting Department Work in Process-Machining Department

Feedback

a1. Remember there are three different areas of inventory; materials, work in process, and finished goods.

a2. Prepare the May journal entry for the Casting Department for the conversion costs charged to production. If an amount box does not require an entry, leave it blank. Round all amounts to the nearest whole dollar.

	Cash Factory Overhead Finished Goods Wages Expense Work in Process-Casting Department Work in Process-Machining Department
	Accounts Receivable Cash Materials Wages Payable Work in Process-Casting Department Work in Process-Machining Department
	Accounts Payable Cash Factory Overhead Finished Goods Work in Process-Casting Department Work in Process-Machining Department

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a2. Remember that a work in process account accumulates all costs (direct materials, direct labor, manufacturing overhead) that are added to the units in a given department. What types of costs are considered conversion costs?

a3. Prepare the May journal entry for the Casting Department for the completed production transferred to the Machining Department. Round all amounts to the nearest whole dollar.

	Cash Factory Overhead Finished Goods Materials Work in Process-Casting Department Work in Process-Machining Department
	Cash Factory Overhead Finished Goods Materials Work in Process-Casting Department Work in Process-Machining Department

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a3. Are these goods ready for finished goods inventory or do these units need to be transferred to another department first?

b. Determine the Work in Process—Casting Department May 31 balance.
$

c. Compute the change in The rate used to allocate costs between completed and partially completed production.costs per equivalent unit for direct materials and conversion from the previous month (April).

	Cost per Equivalent Unit
Change in materials	Decrease Increase	$
Change in conversion	Decrease Increase	$

Answer 1

a1.	Work in Process-Casting Department	699600
	Materials-Alloy		699600
a2.	Work in Process-Casting Department	131600
	Wages Payable		52640
	Factory Overhead (150% x $52640)		78960
a3.	Work in Process-Machining Department	860020
	Work in Process-Casting Department		860020

Working:

		Equivalent Units
	Physical Flow	Direct Materials	Conversion
Beginnning work in process	700
Started into production	6600
Total units to account for	7300
Beginning work in process completed	700	0	280
Started and completed	6100	6100	6100
Total units completed	6800	6100	6380
Ending work in process	500	500	200
Total units accounted for	7300	6600	6580

	Direct Materials	Conversion	Total
Costs added during May	699600	131600	831200
÷ Equivalent units	6600	6580
Cost per equivalent unit $	106	20	126
Cost of beginning work in process	77000	8820	85820
Cost of beginning work in process completed	0	5600	5600
Cost of units started and completed	646600	122000	768600
Total cost of units completed $	723600	136420	860020
Cost of ending work in process $	53000	4000	57000

b. Work in Process-Casting Department May 31 balance: $57000

c.

	Cost per Equivalent Unit
Change in materials ($110 - $106)	Decrease	$             4.00
Change in conversion ($21 - $20)	Decrease	$             1.00