The inventory at May 1 and the costs charged to Work in Process--Department B du

Question

The inventory at May 1 and the costs charged to Work in Process--Department B during May for Star Company are as follows:

8,000 units, 3/4 completed………………………………………………………………………………………………….. $ 65,600 From Department A, 43,500 units……………………………………………………………………………………………. 78,300 Direct labor……………………………………………………………………………………………………………………… 292,400 Factory overhead………………………………………………………………………………………………………………..107,100

During May, all direct materials are transferred from Department A, the units in process at May 1 were completed, and of the 43,500 units entering the department, all were completed except 9,000 units which were 2/3 completed. Inventories are costed by the first-in, first-out method.

Prepare a cost of production report for May.

Explanation / Answer

Cost of production report for May is prepared as under:

8,000 units 3/4th completed $65,600 From Department A 43,500 units 78,300 Direct Labour 2,92,400 Factory overhead 1,07,100 Star Company Cost of production report For the month ended may 31 Total Equivalent units Direct Material Conversion Units Units charged to production: Opening units 8,000 Received from Department A 43,500 Total units to be accounted 51,500 Units to be assigned opening units (3/4 completed) 8,000 2,000    Started and completed in May 34,500 34,500 34,500 Transferred to finished goods in May 42,500 34,500 36,500 Closing inventory 9,000 9,000 6,000 Total units to be cost assigned 51,500 43,500 42,500 Costs Direct Material Conversion Total Total Cost for may in department B 78,300 3,99,500 Equivalent units as computed above 43,500 42,500 Cost per equivalent unit 1.8 9.4 Cost charged to production opening cost 65600 Cost incurred 477800 Total cost to be accounted 543400 Cost allocated May 1 balance 65,600 opening inventory completed 18800 18800 started and completed in May 62100 324300 386400 Closing inventory 16200 56400 72600 Total cost assigned 5,43,400

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