Question

Cost of Production Report

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, 2014:

Work in Process— Filling Department ( 3,400 units, 60% completed):

Direct materials ( 3,400 × $ 9.58) =      $ 32,572

Conversion ( 3,400 × 60% × $ 3.90) =      7,956

Total                                                       $ 40,528

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

Direct materials transferred from Reaction Department: 52,300 units at $ 9.50 a unit = $ 496,850

Direct labor = 101,560

Factory overhead = 95,166

During January, 53,000 units of specialty chemicals were completed. Work in Process— Filling Department on January 31 was 2,700 units, 30% completed.

Instructions

Use the attached excel file to:

1. Prepare a cost of production report for the Filling Department for January.

2. Journalize the entries for costs transferred from Reaction to Filling and the costs transferred from Filling to Finished Goods.

3. Determine the increase or decrease in the cost per equivalent unit from December to January for direct materials and conversion costs.

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

Mod HOME INSERT PAGE LAYOUT FORMULAS DATA REVIEW VIEW ADD-INS Quick Books FILE AutoSum A 10 Wrap Text copy 0 og Conditional Format as Cell Insert Delete Format Past Sort & Find & Merge & Cel Format Painter Clear Formatting Table Styles Clipboard Alignment Styl Ed L21 DOVER CHEMICAL COMPANY Cost of Production Report Filling Department For the Month Ended January 31, 2014 UNITS Equivalent Units 20 Whole Units Direct Materials Conversion Units charged to production Inventory in process, January 1 23 Received from Reaction Department Total units accounted for by the Filling Department 24 25 26 Units to be assigned cost 27 Inventory in process, January 1 complete) 28 Started and completed in January 29 Transferred to finished goods in Janua 30 Inventory in process, January 3 complete) Total units to be assigned cost 32 33 COSTS 34 Costs 35 Direct Materials Conversion Total 36 Costs per equivalent un 37 Total costs for January in Filling Department 38 Total equivalent units Pr. 18 (3)-3B BEE READY Sig 100% 3:09 PM 2/9/2016

Answer 1

1.Cost of production report for the filling department is as follows:

1 Units 2 Whole units Equivalent units Direct materials Conversion 4 Units charged to production: 5 Inventory in process, January 1 6 Received from Reaction department 7 Total units accumulated for by the filing department 3,400 52,300 55,700 9 Units to be assigned cost 10 Inventory in process, January 1 (3,400units complete) 11 Starte 12 Transferred to finished goods in January 13 Inventory in process, January 31 (2,700units complete) 14 Total units to be assigned cost 15 16 Costs 17 18 19 Cost perequivalent unit 3.400 49,600 53,000 2,700 55,700 1,360 49.600 50,960 810 51,770 d and completed in January (53,000-3,400) 49.600 49.600 2,700 52,300 Costs Direct materials Conversion Total 20 Total costs for January in filing department $496,850.00$196,726.00 51,770 $3.80 21 Total equivalent units 22 Cost per equivalent unit 23 24 Costs assigned to production: 25 Inventory in process, J 26 Costs incurred in January 27 Total costs accumulated for by the filing department 28 29 Costs allocated to completed and partially completed units: 30 Inventory in process, January 1 31 To complete inventory in process, J 32 Cost of completed January work in proces 33 Started and completed in January 34 Transferred to moulding department in January 35 Inventory in process, January 31 36 Total costs assigned by the filling department 52,300 $9.50 S40,528.00 S693,576.00 S734,104.00 S40,528.00 $5,168.00S5,168.00 S45,696.00 S471,200.00 S188,480.00 S659,680.00 S471,200.00 S188,480.00 S705,376.00 $3,078.00 S28,728.00 S734,104.00 S0.00 S25,650.00

1 Units Whole units Equivalent units Direct materials Conversion 2 4 Units charged to production: 5 Inventory in process, January 1 6 Received from Reaction department 7 Total units accumulated for by the filing department 3400 52300 B5+B6 9 Units to be assigned cost 10 Inventory in process, January 1 (3,400units complete 11 Started and completed in January (53,000-3,400) 12 Transferred to finished goods in January 3400 В 10*40% B11 D10+D11 B13*30% D12+D1:3 53000-3400 B10+B11 B11 -C10+C11 nventory in process, Jamuary 31 (2,700units complete) 2700 14 Total units to be assigned cost 15 16 Costs B12+B13 =C12+C13 Costs Direct materials Conversion Total 18 19 Cost per equivalent unit 20 Total costs for January in filling department 21 Total equivalent units 22 Cost per equivalent unit 23 24 Costs assigned to production: 25 496850 -C14 101560+95166 D14 B20 B21 -C20/C21 32572+7956 -496850+101560+95166 Inventory in process, January 1 26 Costs incurred in January 27 Total costs accumulated for by the filing department 28 29 Costs allocated to completed and 30 Inventory in process, January 1 31 To complete inventory in process, January 1 32 Cost of completed January work in process 33 Started and completed in January 34 Transferred to moulding department in January 35 Inventory in process, January 31 36 Total costs assigned by the filling department D25+D26 completed units: D25 SUM(B31:C31 SUM(D30D31) +B33+C33 +D32+D33 +B35+C35 +D34+D35 D10 C22 -+C11*B22 +B32+B33 +C13*B22 +D11 *C22 +C32+C33 +D13*C22

2. Prepare the Journal entries to record transfer in and out from the filling department as follows:

Date Account Titles and Explanation Debit (S) Credit (S) Work in process- Filling department To record the transfer of costs from F department to R department) Work in process- filling Department 496,850 Work in process reaction department process 496,850 196,726 Wages payable Factorv overhead 101,560 95,166 To record the transfer of costs from F department to R department) Finished goods 705,376 Work in process- Filling department To record the transfer the cost of finished goods inventony) 705,376

3. Determine the change in equivalent cost per unit for the two months as follows:

Increase / decrease& Amount Increase/ Decrease Amun Change in direct material cost per equivalent unit (S9.58-9.5) Change in conversion cost per equivalent unit ($3.9 - 3.8) (S) Decrease 0.08 Increase 0.1

4. Uses of the cost production report is as follows:

The cost of production report diplays all the costs which are chargeable to a department. Therefore, the total accumulated costs for a period can be delivered using the cost of production report. It serves as the main sources for preparing journal entries of the entity. It presents the flow of production during the period which is useful for the management in decision making.

The increase in the conversion cost per equivalent unit is because of the increase in the conversion cost in the month of January. The decrease in the material cost per equivalent unit is because of the decrease in the material cost in the month of January.