Hall?s Exteriors produces exterior siding for homes. The Preparation Department
ID: 2465752 • Letter: H
Question
Hall?s Exteriors produces exterior siding for homes. The Preparation Department begins with wood, which is chopped into small bits. At the end of the process, an adhesive is added. Then the wood/adhesive mixture goes on to the Compression Department, where the wood is compressed into sheets. Conversion costs are added evenly throughout the preparation process. January data for the Preparation Department are as follows (in millions)
R1. Draw a time line for the Preparation Department.
R2. Use the time line to help you compute the equivalent. (Hint: Each direct material added at a different point in the production process requires its own equivalent unit computation.)
R3. Compute the total costs of the units (sheets) a. Completed and transferred out to the Compression Department. b. In the Preparation Department’s Ending work in process inventory.
R4. Prepare the journal entry to record the cost of the sheets completed and transferred out to the Compression Department.
R5. Post the journal entries to the Work in process inventory—Preparation T-account. What is the ending balance?
Explanation / Answer
ASSUMPTION TAKEN:
It is assumed that in closing WIP only 30% of wood, adhesieve, labour, manfacturing over head cost is incurred in current month and balance 70% wood, adhesieve, labour, manfacturing over head cost will be incurred in next month.
CALCULATION OF EQUIVALENT UNITS wood Adhesieve Labour Manf. OH % Eq. units % Eq. units % Eq. units % Eq. units T/f to F.goods 2000 100% 2000 100% 2000 100% 2000 100% 2000 Cl. WIP 1700 30% 510 30% 510 30% 510 30% 510 2510 2510 2510 2510 STATEMENT OF COST PER EQUIVALENT UNIT WOOD ADHESIVE LABOUR MANF. OH TOTAL Cost incurred (A) 3108 1240 558 1450 Equivalent unit (B) 2510 2510 2510 2510 cost per unit (A/B) 1.24 0.49 0.22 0.58 2.53 STATEMENT OF COST EVALUATION wood Adhesieve Labour Manf. OH TOTAL COST T/f to F.goods 2000 1.24*2000=2480 .49*2000=980 .22*2000=440 .58*2000=1160 5060 Cl. WIP 1700 1.24*510=632.4 .49*510=249.9 .22*510=112.2 .58*510=295.8 1290.3 TOTAL COST 3112.4 1229.9 552.2 1455.8Related Questions
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