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Equivalent Units and Related Costs; Cost of Production Report; Entries Dover Chemical Company manufactures specialty chemicals...

Equivalent Units and Related Costs; Cost of Production Report; Entries

Dover Chemical Company manufactures specialty chemicals by a series of three processes, all materials being introduced in the Distilling Department. From the Distilling Department, the materials pass through the Reaction and Filling departments, emerging as finished chemicals.

The balance in the account Work in Process—Filling was as follows on January 1:

Work in Process—Filling Department
(5,500 units, 30% completed):
Direct materials (5,500 x $13.6) $74,800
Conversion (5,500 x 30% x $8.8) 14,520
$89,320

The following costs were charged to Work in Process—Filling during January:

Direct materials transferred from Reaction
Department: 71,000 units at $13.4 a unit $951,400
Direct labor 326,760
Factory overhead 313,950

During January, 70,400 units of specialty chemicals were completed. Work in Process—Filling Department on January 31 was 6,100 units, 40% completed.

Required:

1. Prepare a cost of production report for the Filling Department for January. If an amount is zero, enter "0". If required, round your cost per equivalent unit answers to two decimal places.

2. Journalize the entries for (1) costs transferred from Reaction to Filling and (2) the cost transferred from Filling to Finished Goods. If an amount box does not require an entry, leave it blank.

3. Determine the increase or decrease in the cost per equivalent unit from December to January for direct materials and conversion costs. If required, round your answers to two decimal places.

4. Discuss the uses of the cost of production report and the results of part (3).

It will be Weighted Average

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Answer #1

Solution 1:

Dover Chemical Company
Cost of Production Report-Filling Department
For the Month Ended January 31
Unit Information
Units charged to production:
Inventory in process, January 1 5500
Received from Reaction Department 71000
Total units accounted for by the Filling Department 76500
Units to be assigned costs:
Equivalent Units
Whole Units Direct Materials Conversion
Inventory in process, January 1 5500 0 3850
Started and completed in January 64900 64900 64900
Transferred to finished goods in January 70400 64900 68750
Inventory in process, January 31 6100 6100 2440
Total units to be assigned costs 76500 71000 71190
Cost Information
Cost per equivalent unit:
Direct Materials Conversion
Total costs for January in Filling Department $951,400.00 $640,710.00
Total equivalent units 71000 71190
Cost per equivalent unit $13.40 $9.00
Costs assigned to production:
Direct Materials Conversion Total
Inventory in process, January 1 $74,800.00 $14,520.00 $89,320.00
Costs incurred in January $951,400.00 $640,710.00 $1,592,110.00
Total costs accounted for by the Filling Department $1,026,200.00 $655,230.00 $1,681,430.00
Costs allocated to completed and partially completed units:
Inventory in process, January 1 balance $74,800.00 $14,520.00 $89,320.00
To complete inventory in process, January 1 $0.00 $34,650.00 $34,650.00
Cost of completed January 1 work in process $74,800.00 $49,170.00 $123,970.00
Started and completed in January $869,660.00 $584,100.00 $1,453,760.00
Transferred to finished goods in January $944,460.00 $633,270.00 $1,577,730.00
Inventory in process, January 31 $81,740.00 $21,960.00 $103,700.00
Total costs assigned by the Filling Department $1,026,200.00 $655,230.00 $1,681,430.00

Solution 2:

Journal Entries - Dover Chemical Company
S. No. Particulars Debit Credit
1 Work In Process - Filling Department Dr $951,400.00
            To Work In Process - Reaction Department $951,400.00
(Being cost of goods completed in reaction transferred to Filling department)
2 Finished Goods Inventory Dr $1,577,730.00
            To Work In Process - Filling Department $1,577,730.00
(Being completed units transferred to finished goods)

Solution 3:

Particulars Increase or Decrease Amount
Change in direct materials cost per equivalent unit ($13.60 - $13.40) Decrease $0.20
Change in conversion cost per equivalent unit ($9.00 - $8.80) Increase $0.20

solution 4:

The cost of production report may be used as the basis for allocating product costs between work in process and Transferred out goods. The report can also be used to control costs by holding each department head responsible for the units entering production and costs incurred in the department. Any differences in unit product costs from one month to another such as those in part (3) can be studied carefully and any significant differences investigated.

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