Dover Chemical Company manufactures specialty chemicals by a series of three pro
ID: 2406012 • Letter: D
Question
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:
The following costs were charged to Work in Process—Filling during January:
During January, 53,700 units of specialty chemicals were completed. Work in Process—Filling Department on January 31 was 4,700 units, 40% 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.
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1. Calculate equivalent units for materials and conversion costs. Calculate the cost per equivalent unit for materials and conversion costs. Calculate the costs assigned to the beginning inventory, the units started and completed, and the ending inventory.
2. Journalize the entries for (1) costs transferred from Reaction to Filling and (2) the cost transferred from Filling to Finished Goods.
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2. Remember that there are three types of inventory; materials, work in process, and finished goods. What costs are captured in the work in process account? Are these units 100% complete or are they being transferred to another 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.
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.
Work in Process—Filling Department (4,200 units, 70% completed): Direct materials (4,200 x $16.2) $68,040 Conversion (4,200 x 70% x $10.6) 31,164 $99,204Explanation / Answer
Solution 1:
Solution 2:
Solution 3:
Change in direct materials cost per equivalent unit from december to Janaury = $16.20 - $16 = $0.20 Decrease
Change in conversion cost per equivalent unit from december to january = $11 - $10.6 = $0.40 Increase
Solution 4:
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.
Dover Chemical Company Filling Department Computation of Equivalent unit (FIFO) Particulars Physical units Material Conversion Units to be accounted for: Beginning WIP Inventory 4200 Units started this period 54200 Total unit to be accounted for 58400 Units Accounted for: Units completed and transferred out From beginning inventoryMaterial - 0%
Conversion - 30% 4200 0 1260 Started and completed currently 49500 49500 49500 Transferred to finished goods 53700 49500 50760 Units in ending WIP
Material - 100%
Conversion - 40% 4700 4700 1880 Total units accounted for 58400 54200 52640
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