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 1,200 pounds of alloy in process, which were 70% complete as to conversion. The Work in Process balance for these 1,200 pounds was $133,440, determined as follows:

Direct materials (1,200 x $100)	$120,000
Conversion (1,200 x 70% x $16)	13,440
	$133,440

During May, the Casting Department was charged $1,084,800 for 11,300 pounds of alloy and $67,530 for direct labor. Factory overhead is applied to the department at a rate of 150% of direct labor. The department transferred out 11,600 pounds of finished castings to the Machining Department. The May 31 inventory in process was 55% complete as to conversion.

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

	Work in Process-Casting Department
	Materials-Alloy

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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.

	Work in Process-Casting Department
	Wages Payable
	Factory Overhead-Casting 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.

	Work in Process-Machining Department
	Work in Process-Casting 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 costs per equivalent unit for direct materials and conversion from the previous month (April).

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

Answer 1

Answer-a1:

General Journal Debit Credit Date Work in process-Casting Department 1,084,800 Material-Alloy 1,084,800 May

Answer-a2:

General Journal Debit Credit Date Work in process-Casting Department 168,825 Wages payable May 67,530 Factory overhead-Casting Department 101,295

Answer-a3:

General Journal Debit Credit Date Work in process-Machining Department Work in process-Casting Department 1,292,820 May 1,292,820

Answer-b:

Work in Process—Casting Department May 31 balance is $94,205 calculated as below:-

STATEMENT OF EQUIVALENT PRODUCTION UNITS Equivalent production Units Output Direct material Conversion cost Qty Qty Unit completed & transferred Units in ending WIP 100 11600 11600 100 11600 900 900 100 495 55 Total 12500 12500 12095

STATEMENT OF COST PER EQUIVALENT UNIT Equivalent Cost per Cost ($) Element of Cost production (units) (units) Materials Beginning WIP 120,000 Current cost 1,084,800 12,500 $ $ Total 1,204,800 96.38 Conversion cost $ Beginning WIP 13,440 $ Current cost 168,825 $ 12,095 $ Total 182,265 15.07

STATEMENT OF VALUATION Equivalent production Cost per (units) 11600 $ 11600 $ 900 $ 495 $ Element of cost Total Cost Production unit Cost 96.38 $ 1,118,008 15.07 $ 96.38$ Material Finished production Conversion cost 174,812 $1,292,820 Material 86,746 W-I-P Conversion cost 15.07 $ 7,460 $ 94,205