Arabica Highland Coffee Company roasts and packs coffee beans. The process begin

Question

Arabica Highland Coffee Company roasts and packs coffee beans. The process begins by placing coffee beans into the Roasting Department. From the Roasting Department, coffee beans are then transferred to the Packing Department. The following is a partial work in process account of the Roasting Department at July 31:

Required:

1. Prepare a cost of production report, and identify the missing amounts for Work in Process—Roasting Department. If an amount is zero, enter "0". When computing cost per equivalent units, round to two decimal places.

2. Assuming that the July 1 work in process inventory includes $21,700 of direct materials, determine the increase or decrease in the cost per equivalent unit for direct materials and conversion between June and July. If required, round your answers to the nearest cent.

ACCOUNT Work in Process—Roasting Department ACCOUNT NO. Date Item Debit Credit Balance Debit Credit July 1 Bal., 7,000 units, 2/5 completed 24,220 31 Direct materials, 280,000 units 896,000 920,220 31 Direct labor 179,600 1,099,820 31 Factory overhead 44,880 1,144,700 31 Goods transferred, 281,000 units ? 31 Bal., ? units, 2/5 completed ?

Explanation / Answer

Arabica Highland Coffee Company Cost of Production Report-Roasting Department For the Month Ended July 31 Unit Information Units charged to production: Inventory in process, July 1 7000 Received from materials storeroom 280000 Total units accounted for by the Roasting Department 287000 Units to be assigned costs: Equivalent Units Whole Units Direct Materials Conversion Inventory in process, July 1 7000 0 4200 Started and completed in July 274000 274000 274000 Transferred to Packing Department in July 281000 274000 278200 Inventory in process, July 31 6000 6000 2400 Total units to be assigned costs 287000 280000 280600 Cost Information Costs per equivalent unit: Direct Materials Conversion Total costs for July in Roasting Department 896000 224480 Total equivalent units 280000 280600 Cost per equivalent unit 3.2 0.8 Costs charged to production: Direct Materials Conversion Total Inventory in process, July 1 24220 Costs incurred in July 1120480 Total costs accounted for by the Roasting Department 1144700 Cost allocated to completed and partially completed units: Inventory in process, July 1 balance 24220 To complete inventory in process, July 1 (0.80*4200) 0 3360 3360 Cost of completed July 1 work in process 27580 Started and completed in July (274000 Unit) 876800 219200 1096000 Transferred to Packing Department in July 1123580 Inventory in process, July 31 19200 1920 21120 Total costs assigned by the Roasting Department 1144700 Increase or Decrease Amount Change in direct materials cost per equivalent unit** Increase 0.1 Change in conversion cost per equivalent unit*** Decrease 0.2 ** Material Cost per Equivalent unit for Opening WIP= Cost of Material/No. of Equivalent Unit = $21700/7000=$3.10 Cos per Equivalent Unit as Claculated in above solution : $3.20 Hence increase in material cost/Eq. Unit will be ($3.20-$3.10)=$0.10 ** Conversion Cost per Equivalent unit for Opening WIP =(Total Cost - cost of Material )/Equivalent Unit = ($24220-$21700)/4200=$0.60 Conversion Cost per Equivalent Unit as Claculated in above solution : $0.80 Hence decrease in Conversion lcost/Eq. Unit will be ($0.8-$0.60)=$0.20

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