Executive Designs began making high-quality office furniture in January. The com
ID: 2520189 • Letter: E
Question
Executive Designs began making high-quality office furniture in January. The company's executive desks are produced in two departments: Cutting and Finishing. Component kits are produced in the Cutting Department and then transferred to the Finishing Department for trimming and assembly. During its first month of operations, the Cutting Department started 15,000 executive desk kits. January direct materials costs in the Cutting Department totaled $600,000, and conversion costs totaled $590,000. Ending inventory on January 31 consisted of 4,000 partially processed component kits. These units were 100 percent complete with respect to direct materials, but only 20 percent complete with respect to conversion.
Assume that on January 31 the Finishing Department of Executive Designs had 3,000 partially trimmed and assembled executive desks in ending inventory. These units were, of course, 100 percent complete with respect to components transferred in from the Cutting Department, but only 30 percent complete with respect to direct trim materials, and 60 percent complete with respect to conversion. During January, the Finishing Department incurred direct materials costs (for trim) of $142,400, and conversion costs of $235,200.
a. Compute how many units were started in the Finishing Department during January.
b. Compute the number of executive desks transferred out of the Finishing Department in January.
c. Compute the equivalent units of input resources for the Finishing Department in January.
d. Compute the cost per equivalent unit of input resource for the Finishing Department in January.
e. Prepare the summary journal entry required to transfer the cost of executive desks from the Finishing Department's Work in Process Inventory to the company's Finished Goods Inventory in January.
f. Compute the total cost assigned to the Finishing Department's ending inventory in process on January 31.
Explanation / Answer
CUTTING DEPARTMENT UNITS TO ACCOUNT FOR: Beginning Work in Process units 0 Add: Units Started in Process 15,000 Total Units to account for: 15,000 UNITS TO BE ACCOUNTED FOR: Units started and completed 11,000 Ending Work in Process 4,000 Total Units to be accounted for: 15,000 Equivalent Units: Material Cost Conversion % Completion Units % Completion Units Units started and completed 100% 11,000 100% 11,000 Ending Work in Process 100% 4,000 20% 800 Total Equivalent units 15,000 11,800 COST PER EQUIVALENT UNIT: Material Conversion Total cost added during the year 600,000 590,000 Equivalent Units 15,000 11,800 Cost per Equivalent unit 40 50 TOTAL COST ACCOUNTED FOR: Units started and Transferred out (11000 units) Equivalent unit Cost per EU Total Cost Material 11,000 40 440000 Conversion Cost 11,000 50 550000 Total Cost of Units completed and transferred out: 990000 Ending Work in process (4,000 units) Equivalent unit Cost per EU Total Cost Material 4,000 40 160000 Conversison Cost 800 50 40000 Total cost of Ending Work in process: 200,000 FINISHING DEPARTMENT UNITS TO ACCOUNT FOR: Beginning Work in Process units 0.00 Add: Units Started in Process 11,000.00 Total Units to account for: 2,400.00 UNITS TO BE ACCOUNTED FOR: Units started and completed 8,000.00 Ending Work in Process 3,000.00 Total Units to be accounted for: 11,000.00 Equivalent Units: Transferred in Cost Material Cost Conversion Cost % Completion Units % Completion Units % Completion Units Units started annd completed 100% 8,000.00 100% 8,000.00 100% 8,000.00 Ending Work in Process 100% 3,000.00 30% 900.00 60% 1,800.00 Total Equivalent units 11,000.00 8,900.00 9,800.00 COST PER EQUIVALENT UNIT: Transferred-in Material Conversion Cost added during the period 990,000 142,400 235,200 Equivalent Units 11,000.00 8,900.00 9,800.00 Cost per Equivalent unit 90.00 16.00 24.00 TOTAL COST ACCOUNTED FOR: Units started and Completed and Transferred out (8000 units) Equivalent unit Cost per EU Total Cost Transferred-in cost 8,000 90 720000 Material cost 8,000 16 128000 Conversion Cost 8,000 24 192000 Total Cost of Units completed and transferred out: 1,040,000 Ending Work in Process (3000 units) Equivalent unit Total Cost Transferred-in cost 3,000.00 90 270000 Material cost 900.00 16 14400 Conversion Cost 1,800.00 24 43200 Total cost of Ending Work in process: 327,600 Req A: Units started in Finishing: 11000 units Req b: Number of units transferred out: 8000 unts Req c:Equivalen unit: Trnsfrred in 11000 materiala 8900 conversion 9800 Req d: Cost per equivalent units: Trnsfrred in 90 Material 16 conversion 24 Req e: Journal entry: Finished Goods inventory Dr. 1,040,000 Work in process- Finishing 1,040,000 Req f: Ending inventory cost: $327,600
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