Equivalent Units and Related Costs; Cost of Production Report; Entries Dover Che
ID: 2407367 • Letter: E
Question
Equivalent Units and Related Costs; Cost of Production Report; Entries
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, 66,500 units of specialty chemicals were completed. Work in Process—Filling Department on January 31 was 5,800 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.
2. Journalize the entries for (1) costs transferred from Reaction to Filling and (2) the cost 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. 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 and . 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 (5,200 units, 40% completed): Direct materials (5,200 x $13.3) $69,160 Conversion (5,200 x 40% x $8.6) 17,888 $87,048Explanation / Answer
Solution 1:
Solution 2:
Solution 3:
Change in direct materials cost per equivalent unit = $13.30 - $13 = $0.30 Decrease
Change in conversion cost per equivalent unit = $8.90 - $8.60 = $0.30 Increase
Solution 4:
The cost of production report may be used as the basis for allocating product costs between cost of unit completed and ending WIP . 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 5200 Units started this period 67100 Total unit to be accounted for 72300 Units Accounted for: Units completed and transferred out From beginning inventoryMaterial - 0%
Conversion - 60% 5200 0 3120 Started and completed currently 61300 61300 61300 Transferred to finished goods 66500 61300 64420 Units in ending WIP
Material - 100%
Conversion - 40% 5800 5800 2320 Total units accounted for 72300 67100 66740
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