Chapter 18: Q,18-19RQ (page 1006)
Question: Department 1 is transferring units that cost $40,000 to Department 2. Give the journal entry.
Answer
Date | Particulars | Debit ($) | Credit ($) |
Work in process inventory-Department 2 | 40,000 | ||
Work in process inventory-Department 1 | 40,000 |
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Question: What are the primary differences between job order costing systems and process costing systems?
Refer to Short Exercise S18A-15. At Spring Fresh, water is added at the beginning of the filtration process. Conversion costs are added evenly throughout the process. Now assume that in February, 130,000 liters were completed and transferred out of the Filtration Department into the Bottling Department. The 70,000 liters remaining in Filtration’s ending Work-in-Process Inventory were 80% of the way through the filtration process. Recall that Spring Fresh has no beginning inventories.
Compute the equivalent units of production for direct materials and conversion
costs for the Filtration Department using the FIFO method.
Happy Colors manufactures crayons in a three-step process: mixing, molding, and packaging. The Mixing Department combines the direct materials of paraffin wax and pigments. The heated mixture is pumped to the Molding Department, where it is poured into molds. After the molds cool, the crayons are removed from the molds and are transferred to the Packaging Department, where paper wrappers are added and the crayons are boxed.
In the Mixing Department, the direct materials are added at the beginning of the
process and the conversion costs are incurred evenly throughout the process. Work in process of the Mixing Department on April 1, 2018, consisted of 300 batches of crayons that were 30% of the way through the production process. The beginning balance in Work-in-Process Inventory—Mixing was \(27,800, which consisted of \)10,700 in direct materials costs and $17,100 in conversion costs. During April, 3,200 batches were started in production. The Mixing Department transferred 2,800 batches to the Molding Department in April, and 700 were still in process on April 30. This ending inventory was 80% of the way through the mixing process. Happy Colors uses FIFO process costing.
At April 30, before recording the transfer of costs from the Mixing Department
to the Molding Department, the Happy Colors general ledger included the following account:
Work-in-process inventory – Mixing
Balance, March 1 | 27,800 | ||
Direct materials | 22,400 | ||
Direct labor | 21,330 | ||
Manufacturing overhead | 44,070 |
Requirements
1. Prepare a production cost report for the Mixing Department for April. Round
equivalent unit costs to four decimal places. Round all other costs to the nearest
dollar.
2. Journalize all transactions affecting the Mixing Department during April, including the entries that have already been posted. Assume the labor costs are accrued and not yet paid.
Color Explosion prepares and packages paint products. Color Explosion has two departments: Blending and Packaging. Direct materials are added at the beginning of the blending process (dyes) and at the end of the packaging process (cans). Conversion costs are added evenly throughout each process. The company uses the weighted- average method. Data from the month of May for the Blending Department are as follows:
Gallons | |
Beginning work-in-process inventory | 0 gallons |
Started in production | 8,500 gallon |
Completed and transferred out to packaging in may | 6,500 gallon |
Ending work-in-process inventory (30% of the way through the blending process) | 2,000 gallon |
Costs | |
Beginning work-in-process inventory | \(0 |
Costs added during May: | |
| 5,525 |
| 1,500 |
| 2,547 |
Total costs added during May | \)9,572 |
Requirements
1. Compute the Blending Department’s equivalent units of production for direct
materials and for conversion costs.
2. Compute the total costs of the units (gallons)
a. completed and transferred out to the Packaging Department.
b. in the Blending Department ending Work-in-Process Inventory.
The Finishing Department started the month with 500 units in process, received 2,000 units from the Assembly Department, and transferred 2,100 units to the finished goods storage area. All direct materials are added at the beginning of the process. The units in process at the end of the month are 45% complete concerning conversion costs. The department uses the weighted-average method. The Finishing Department incurred the following costs:
Beginning WIP | Added this month | Total | |
Transferred in | \(6,250 | \)25,000 | \(31,250 |
Direct materials | 500 | 2,000 | 2,500 |
Conversion cost | 1,250 | 5,590 | 6,840 |
Total | \)8,000 | \(32,590 | \)40,590 |
8. How many units are still in process at the end of the month?
9. Compute the equivalent units of production for the Finishing Department.
10. Determine the cost per equivalent unit for transfer, direct materials, and conversion costs.
11. Determine the cost to be transferred to Finished Goods Inventory.
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