Process Costing PR 18-3B Equivalent units and related costs; cost of production

Question

Process Costing

PR 18-3B Equivalent units and related costs; cost of production report; entries Meadowland 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 December 1, 2012: The following costs were charged to Work in Process-Filling during December: During December, 40,900 units of specialty chemicals were completed. Work in Process- Filling Department on December 31 was 3,700 units, 30% completed. Instructions 1. Prepare a cost of production report for the Filling Department for December. 2. Journalize the entries for costs transferred from Reaction to Filling and the cost transferred from Filling to Finished Goods. 3. Determine the increase or decrease in the cost per equivalent unit from November to December for direct materials and conversion costs. 4. Discuss the uses of the cost of production report anti the results of part (3).

Explanation / Answer

The percent defective for parts produced by a manufacturing process is targeted at 4%. The process is monitored daily by taking samples of sizes n = 160 units. Suppose that today’s sample contains 14 defectives.

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