Question

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    

(4,200 units, 70% completed):    

Direct materials (4,200 x $13.8)    $57,960    

Conversion (4,200 x 70% x $9)    26,460    

$84,420    

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

Direct materials transferred from Reaction    

Department: 54,200 units at $13.6 a unit    $737,120    

Direct labor    249,190    

Factory overhead    239,422    

During January, 53,700 units of specialty chemicals were completed. Work in Process—Filling Department on January 31 was 4,700 units, 50% 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.

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    

Received from Reaction Department    

Total units accounted for by the Filling Department    

Units to be assigned costs:    

Equivalent Units    

Whole Units    Direct Materials    Conversion    

Inventory in process, January 1    

Started and completed in January    

Transferred to finished goods in January    

Inventory in process, January 31    

Total units to be assigned costs    

Cost Information    

Cost per equivalent unit:    

Direct Materials    Conversion    

Total costs for January in Filling Department    $    $    

Total equivalent units    

Cost per equivalent unit    $    $    

Costs assigned to production:    

Direct Materials    Conversion    Total    

Inventory in process, January 1    $    

Costs incurred in January    

Total costs accounted for by the Filling Department    $    

Costs allocated to completed and partially completed units:    

Inventory in process, January 1 balance    $    

To complete inventory in process, January 1    $    

Cost of completed January 1 work in process    $    

Started and completed in January    $    

Transferred to finished goods in January    $    

Inventory in process, January 31    

Total costs assigned by the Filling Department    $    

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.

(1)    Work in Process-Filling Department     

Work in Process-Reaction Department     

(2)    Finished Goods     

Work in Process-Filling Department     

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.

Increase or Decrease    Amount    

Change in direct materials cost per equivalent unit    Decrease     $    

Change in conversion cost per equivalent unit    Increase     $    

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

The cost of production report may be used as the basis for allocating product costs between Work in Process  and Finished Goods . The report can also be used to control costs by holding each department head responsible for the units entering production and the 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.