Process Costing with No Beginning Inventories: Part II
Exercise 18.7 is an extension of Exercise 18.6.
Assume that on January 31 the Finishing Department of Executive Designs had 3,000 partially trimmed and assembled executive desks in ending inventory. These units were, of course, 100 percent complete with respect to components transferred in from the Cutting Department, but only 30 percent complete with respect to direct trim materials, and 60 percent complete with respect to conversion. During January, the Finishing Department incurred direct materials costs (for trim) of $142,400, and conversion costs of $235,200.
a. Compute how many units were started in the Finishing Department during January.
b. Compute the number of executive desks transferred out of the Finishing Department in January.
c. Compute the equivalent units of input resources for the Finishing Department in January.
d. Compute the cost per equivalent unit of input resource for the Finishing Department in January.
e. Prepare the summary journal entry required to transfer the cost of executive desks from the Finishing Department’s Work in Process Inventory to the company’s Finished Goods Inventory in January.
f. Compute the total cost assigned to the Finishing Department’s ending inventory in process on January 31.
Exercise 18.6
Process Costing with No Beginning Inventories: Part I
Executive Designs began making high-quality office furniture in January. The company’s executive desks are produced in two departments: Cutting and Finishing. Component kits are produced in the Cutting Department and then transferred to the Finishing Department for trimming and assembly. During its first month of operations, the Cutting Department started 15,000 executive desk kits. January direct materials costs in the Cutting Department totaled $600,000, and conversion costs totaled $590,000. Ending inventory on January 31 consisted of 4,000 partially processed component kits. These units were 100 percent complete with respect to direct materials, but only 20 percent complete with respect to conversion.
a. Compute the number of component kits transferred from the Cutting Department to the Finishing Department in January.
b. Compute the equivalent units of input resources for the Cutting Department in January.
c. Compute the cost per equivalent unit of input resource for the Cutting Department in January.
d. Prepare the summary journal entry required to transfer finished component kits from the Cutting Department to the Finishing Department in January.
e. Compute the total cost assigned to the Cutting Department’s ending inventory on January 31.
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