PR 17-4A Work in process account data for two months; cost of production reports

Question

PR 17-4A Work in process account data for two months; cost of production reports

Hearty Soup Co. uses a process cost system to record the costs of processing soup, which requires the cooking and filling processes. Materials are entered from the cooking process at the beginning of the filling process. The inventory of Work in Process— Filling on April 1 and debits to the account during April were as follows:

From Cooking Department, 7,800 units $34,320

Direct labor 8,562

Factory overhead 6,387

During April, 800 units in process on April 1 were completed, and of the 7,800 units entering the department, all were completed except 550 units that were 90% completed.

Charges to Work in Process—Filling for May were as follows:

From Cooking Department, 9,600 units $44,160

Direct labor 12,042

Factory overhead 6,878

During May, the units in process at the beginning of the month were completed, and of the 9,600 units entering the department, all were completed except 300 units that were 35% completed.

Instructions

1. Enter the balance as of April 1, in a four-column account for Work in Process—-Filling. Record the debits and the credits in the account for April. Construct a cost of production report, and present computations for determining (A) equivalent units of production for materials and conversion, (B) costs per equivalent unit, (C) cost of goods finished, differentiating between units started in the prior period and units started and finished in April, and (D) work in process inventory.

Answer Check Figure: C. Transferred to finished goods in April, $49,818

2. Provide the same information for May by recording the May transactions in the four-column work in process account. Construct a cost of production report, and present the May computations (A through D) listed in part (1).

3. Comment on the change in costs per equivalent unit for March through May for direct materials and conversion costs.

Explanation / Answer

1) Part a Work in Process-Filling Date Item Debit Credit Balance Dr. Balance Cr. Apr. 1 Balance 800 units, 30% completed: $3,860 30 Cooking Dept., 7,800 units at $4.40 $34,320 $38,180 30 Direct labor $8,562 $46,742 30 Factory overhead $6,387 $53,129 30 Finished goods $49,818 $3,311 30 Balance 550 units, 90% completed $3,311 May. 31 Cooking Dept., 9,600 units at $4.60 $44,160 $47,471 31 Direct labor $12,042 $59,513 31 Factory overhead $6,878 $66,391 31 Finished goods $64,801 $1,590 31 Balance 300 units, 35% completed $1,590 The credits are determined from the supporting cost of production reports part b 1) HEARTY SOUP CO. Cost of Production Report-Filling Department For the Month Ended April 30 UNITS Whole Units Equivalent Units Direct Materials Direct Materials Conversion Units charged to production: Inventory in process, April 1 800 Received from Cooking Department 7800 Total units accounted for by the Filling Department 8600 Units to be assigned costs: Inventory in process, April 1 (30% completed) 800 0 560 Started and completed in April(7800-550) 7250 7250 7250 Transferred to finished goods in April 8050 7250 7810 Inventory in process, April 30 (90% completed) 550 550 495 Total units to be assigned costs 8600 7800 8305 COSTS Costs Direct Materials Conversion Total Cost per equivalent unit: Total production costs for April in Filling Department $34,320 $14,949 Total equivalent units ÷ 7790 ÷ 8295 Cost per equivalent unit $4.4 $1.8 Costs assigned to production: Inventory in process, April 1 $3,860 Costs incurred in April $49,269 Total costs accounted for by the Filling Department $53,129 Cost allocated to completed and partially completed units: Inventory in process, April 1 balance $3,860 To complete inventory in process, April 1 (560 x $1.80) $1,008 Cost of completed April 1 work in process $4,868 Started and completed in April (7240 x $4.40),(7240 x $1.80) $31,900 $13,050 $44,950 Transferred to finished goods in April $49,818 Inventory in process, April 30 (550 x $4.40),(495 x $1.80) $2,420 $891 $3,311 Total costs assigned by the Filling Department $53,129 2) HEARTY SOUP CO. Cost of Production Report-Filling Department For the Month Ended May 31 UNITS Whole Units Equivalent Units Direct Materials Conversion Units charged to production: Inventory in process, May 1 550 Received from Cooking Department 9600 Total units accounted for by the Filling Department 10150 Units to be assigned costs: Inventory in process, May 1 (90% completed) 550 0 55 Started and completed in May (9600 - 300) 9300 9300 9300 Transferred to finished goods in May 9850 9300 9355 Inventory in process, May 31 (35% completed) 300 300 105 Total units to be assigned costs 10150 9600 9460 COSTS Costs Direct Materials Conversion Total Costs per equivalent unit: $44,160 $18,920 Total costs for May in Filling Department Total equivalent units ÷ 9600 ÷ 9460 Cost per equivalent unit $4.6 $2 Costs assigned to production: Inventory in process, May 1 $3,311 Costs incurred in May $63,080 Total costs accounted for by the Filling Department $66,391 Costs allocated to completed and partially completed units: Inventory in process, May 1 balance $3,311 To complete inventory in process, May 1 (55 x $2) $0 $110 $110 Cost of completed May 1 work in process $3,421 Started and completed in May (9300 x $4.6),(9300 x $2) $42,780 $18,600 $61,380 Transferred to finished goods in May $64,801 Inventory in process, May 31 $1,380 $210 $1,590 Total costs assigned by the Filling Department $66,391 3. The cost per equivalent unit for direct materials $4.30 from $4.40 March to $4.60 May. The cost per equivalent unit for conversion costs $1.75 from $1.80 March to $2 May. These increase and decrease be investigated for their underlying causes, and any necessary corrective actions should be taken.

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