Saline Solutions uses process costing to account for production of its unique co

Question

Saline Solutions uses process costing to account for production of its unique compound BG at its River Plant. The River Plant has two departments: R and S. Raw materials are added at two points in the production of BG. First, rubber pellets are added at the beginning of production in Department R. Next, a liquid thinner is added in Department R when the product is 60% complete with respect to conversion costs. Once the basic compound is completed in Department R, it is transferred to Department S for mixing and packaging. The following information is available from the River Plant for May. (No new material is added in Department S.) Department S Production and Costs: May Beginning inventory (50.000 units, 30% oomplete with respect to Department S costs) Total cost (Departmntand Department S) cost: Beginning inventory Current work (490,000 units started) Department R costs Department S costs S 482,424 S3,449,600 1,594,376 The ending inventory has 70,000 units, which are 100 percent complete for Department R costs. Required a. Assume that Saline Solutions used weighted-average process costing and that the cost per equivalent unit for May for materials in Department S is $7.20 and for conversion costs it is $3.20. Prepare a production cost report for Saline Solutions' Department S for the month of May. (Round "Cost per equivalent unit" to 2 decimal places.) Physical Units Equivalent Units Materials Conversion Flow of units: Units to be accounted for Beginning IP inventory Units started this period Total units to account for Units accounted for Completed and transferred out Units in ending inventory Mixing Packaging Total units accounted for Conversion Costs Total Materials Flow of costs: Costs to be accounted for Costs in beginning WIP inventory Current period costs Total costs to be accounted for Cost per equivalent unit Materials Costs accounted for: Costs assigned to units transferred out Costs of ending WIP inventory Total costs accounted for b. What is the cost of product transferred out of Department S for May? of product transferred out c. What is the cost of ending inventory in Department S for May? t of ending in

Explanation / Answer

Physical Equivalent units Units Material Conversion Flow of Units: Units to be accounted for: Beginning WIP Inventory 50000 Units started 490000 Total units to account for 540000 Units accounted for Completed and transferred out 470000 470000 470000 Units in ending inventory 70000 Mixing 70000 Packaging 42000 Total units accounted for 540000 540000 512000 Note: Total Equivalent units of Material 540000 Multiply: Cost per unit 7.2 Total Material cost 3888000 Less: Current Material cost (Deptt r) 3449600 Material cost included in Beginning WIP 438400 Total Beginning WIP inventory cost 482424 Conversion cost included in Beginning WIP 44024 Total conversion cost: Current conversion cost 1594376 Cost included in Beginning WIP 44024 Total conversion cost: 1638400 Divide: cost per units 3.2 Total equivalent units 512000 Less: Units of completed goods 470000 Equivalent units of Ending WIP 42000 Total Material Conversion Flow of cost: Cost to be accounted for: Cost in beginning WIP 482424 438400 44024 Current period cost 5043976 3449600 1594376 Total cost to be accounted for 5526400 3888000 1638400 Cost per equivalent units: Material 7.2 Conversion 3.2 Cost accounted for: Cost assigned to Units transferred out 4888000 3384000 1504000 Cost of Ending WIP 638400 504000 134400 Total cost accounted for 5526400 3888000 1638400 Cost of Product Transferred out: $ 4888,000 Cost of ending Inventory: $ 638400

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