Lisburn Plastic Products Company makes a plastic toy using two departments: part

Question

Lisburn Plastic Products Company makes a plastic toy using two departments: parts and assembly. The following data pertain to the parts department’s transactions in 2018:

The beginning balance in the Work in Process Inventory account was $10,000. This inventory consisted of parts for 2,000 toys. The beginning balances in the Raw Materials Inventory, Production Supplies, and Cash accounts were $97,500, $1,000, and $200,000, respectively.

Direct materials costing $90,000 were issued to the parts department. The materials were sufficient to make 6,000 additional toys.

Direct labor cost was $80,000, and indirect labor costs were $6,000. All labor costs were paid in cash.

The predetermined overhead rate was $0.30 per direct labor dollar.

Actual overhead costs other than production supplies and indirect labor for the year were $18,250, which was paid in cash.

The parts department completed work for 6,400 toys. The remaining toy parts were 25 percent complete. The completed parts were transferred to the assembly department.

All of the production supplies had been used by the end of 2018.

Over- or underapplied overhead was closed to the Cost of Goods Sold account.

Required

Determine the number of equivalent units of production.

Determine the product cost per equivalent unit.

Calculate the total cost allocated between the ending work in process inventory and parts transferred to the assembly department.

Record the transactions in a partial set of T-accounts.

Explanation / Answer

1,2&3) Phy units Material conversion total O WIP (on weighted average production) 2000 2000 2000 Started and completed units 4400 4400 4400 Transferred to assembly 6400 C WIP 1600 1600 400 (25%) Equivalent units 8000 6800 Cost incurred 90000+10000=100000 104000 Cost per eq. unit 12.5 15.29 cost of transferred to assembly 80000 97882 177882 cost of C WIP 20000 6118 26118 4) t-Accounts: RM account: OB $97,500 WIP 90000 CB 7500 WIP account: OB 10000 FG 177882 RM 90000 CB 26118 DL 80000 M O/H 24000 total 204000 total 204000 Manufacturing Overhead account: Ind lab 6000 WIP 24000 other expenses 18250 COGS 250

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