Stein Corporation manufactures in separate processes refrigerators and freezers

Question

Stein Corporation manufactures in separate processes refrigerators and freezers for homes. In each process, materials are entered at the beginning and conversion costs are incurred uniformly. Production and cost data for the first process in making two products in two different manufacturing plants are as follows.
Stamping Department
Production Data—June Plant A R12 Refrigerators Plant B F24 Freezers
Work in process units, June 1 –0– –0–
Units started into production 20,000 20,000
Work in process units, June 30 2,000 3,000
Work in process percent complete 70% 50%
Cost Data—June
Work in process, June 1 $ –0– $ –0–
Materials 840,000 700,000
Labor 200,800 236,000
Overhead 420,000 319,000
Total $1,460,800 $1,255,000

1. For each plant:
Compute the physical unit flow. Compute equivalent units of production for materials and for conversion costs. Determine the unit costs of production. Show the assignment of costs to units transferred out and in process.
2.
(a) Plant A:
(1) Transferred out 18,000
WIP 2,000
(2) Materials 20,000
CC 19,400
(3) Materials $42
CC $32
(4) Transferred out $1,332,000
WIP $128,800
3. Prepare the production cost report for Plant A for June 2005.

Explanation / Answer

Equivalent units - in terms of material Plant A 20,000 Plant B 20,000 (Since the materials are entered at the beginning) Equivalent units - in terms of conversion cost Plant A =18,000+2000*70% 19,400 Plant B =17,000+3000*50% 18,500 Computation of cost per unit ( Amount in $) Plant A Plant B Materials 840,000 700,000 Labour 200,800 236,000 Overhead 420,000 319,000 Total Cost 1,460,800 1,255,000 Cost allocation Plant A Plant B Equivalent units (b)                             20,000                        20,000 Material (a)                           840,000                      700,000 Material cost per unit (a/b) 42 35 Equivalent units (c)                             19,400                        18,500 Labour and Overhead (d)                           620,800                      555,000 Conversion cost per unit (d/c) 32 30 Total cost per unit 74 65 Cost of units transferred out = 18,000* ( 42 + 32) = 17,000* (35+30)                        1,332,000                1,105,000.0 Cost of units in process = 2,000 *42 + ( 1400*32) = 3,000 *35 +(1500*30)                           128,800 150,000

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