Process costing Problem Spectre Chemicals produces Zaloff in a two department pr

Question

Process costing Problem Spectre Chemicals produces Zaloff in a two department process. Information on the two departments for March and April, 2011 are as follows: March 2011:

Department 1: The company had beginning inventory of 6,000 units, 40% completed with a cost of $45,000. During the month, the department transferred in 22,000 units of the direct materials with a cost of $10 per unit. Ending inventory was 7,000 units, 30% completed. Direct labor is $310,500 and factory overhead is $103,500.

Department 2: The company had beginning inventory of 5,000 units, 70% completed with a cost of $80,000. During the month, direct labor was $175,000 and factory overhead was $87,500. Ending inventory was 10,000 units, 50% completed.

April 2011:

Department 1: During the month, the department transferred in 20,000 units of the direct materials with a cost of $11 per unit. Direct labor is $209,000 and factory overhead is $104,500. Ending inventory is 10,000 units 60% completed.

Department 2: The company had beginning inventory of 5,000 units, 70% completed with a cost of $80,000. During the month, direct labor is $175,000 and factory overhead is $87,500.

Required:

1. Compute the Equivalent Units of Production, Material costs, and Conversion costs for each department for March and April, 2011.

2. Complete the attached chart, one for each department and each month

3. Prepare a cost of production report for March and April 2011.

Explanation / Answer

Assumption:

1) FIFO method has been used.

2) Material is assumed to be charged 100%

Satement of Cost:

Statement of Equivalent Production March' 2014 Department 1 Material Labour Overhead Opening WIP (40% complete) 3600 3600 Started and transferred (22000 - 6000) 16000 16000 16000 Ending Inventory (30% complete) 7000 2100 2100 Equivalent units 23000 21700 21700 Department 2 Material Labour Overhead Opening WIP (70% complete) 1500 1500 completed (22000-10000)(22000 unit transferred from Department 1) 12000 17000 17000 Ending Inventory (50% complete) 10000 5000 5000 Equivalent units 22000 23500 23500 April' 2014 Department 1 Material Labour Overhead Opening WIP (30% complete) 4900 4900 started and transferred (20000 - 7000) 13000 13000 13000 Ending Inventory (60% complete) 10000 6000 6000 Equivalent units 23000 23900 23900 Department 2 Material Labour Overhead Opening WIP (50% complete) 5000 5000 completed (20000 - 5000 )(transferred from Department 1 = 20000 units) 15000 15000 15000 Ending Inventory (70% complete) 5000 3500 3500 Equivalent units 20000 23500 23500

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