Answer ;
Given that :
Units :
Work in progress inventory, July = 0
Started production = 50,000
Completed and transferred to refining department = 35,000
Ending work in progress inventory (Two third of mixing process) = 15,000
Costs :
Chemical P = 250,000
Chemical Q = 70,000
Direct labor = 32,000
Manufacturing overhead = 103,000
i)From the given data Here we are calculating the unit cost ;
First Equivalent units :
particulars | Chemical | Direct labor | Factory overhead | |
P | Q | |||
Finished and transfered | 35,000 | 35,000 | 35,000 | 35,000 |
Closing inventory |
= 15,000 * (2/3) = 10,000 |
0 | 10,000 | 10,000 |
Total units |
= 35,000 + 10,000 = 45,000 |
=35,000 + 0 = 35,000 |
= 35,000 + 10,000 = 45,000 |
= 35,000 + 10,000 = 45,000 |
Now,Calculation for Cost per equivalent units :
Particulars | Cost | Equivalent units | Per Unit cost |
Chemical P | 250,000 | 45,0000 |
= 250,000 / 45,000 = 5.56 |
Chemical Q | 70,000 | 35,000 |
= 70,000 / 35,000 = 2 |
Direct labor | 32,000 | 45,000 |
= 32000 / 45,000 = 0.71 |
Factory overhead | 103,000 | 45,000 |
= 103,000 / 45,000 = 2.29 |
Total cost of unit |
= 5.56 + 2 + 0.71 + 2.29 = 10.56 |
Total cost of unit = 10.56
ii)a)The cost of the units completed and transferred out to the Refining Department :
Given completed and transferred out = 35,000
Therefore,
cost of the units completed and transferred out = completed and transferred out * total unit cost
= 35,000 * 10.56
= 369,600
cost of the units completed and transferred out = 369,600
b) The cost of work in process inventory as of July 31 :
Particulars | calculation=ending inventory * cost per unit | Amount |
Chemical p |
=10,000*5.56 = 55,600 |
$ 55,600 |
Direct labour |
=10000*0.71 =7,100 |
$7,100 |
Factory overhead |
=10000*2.29 =22,900 |
$22,900 |
Total cost of work in progress |
=55,600 + 7,100 + 22,900 = $ 85,600 |
iii)Journal entry for cost of units completed and transfered out :
Particulars | Debit | Credit |
Mixing work in progress
To Refining work in progress inventory |
$ 369,600 |
$ 369,600 |
iv)Mixing T - account :
Particulars | Debit | Credit |
Opening balance | 0 | |
Raw material transfer to refining | $ 369,600 | |
Chemical P | $ 250,000 | |
Chemical Q | $ 70,000 | |
Direct labour | $ 32,000 | |
Manufacturing Overhead | $ 103,000 | |
Closing inventory | $ 85,400 | |
Total amount |
= 250,000 + 70,000 + 32,000 + 103,000 = 455,000 |
= 369,600 + 85,400 = 455,000 |
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