Question

eBook Calculator Physical Flow, Equivalent Units, Unit Costs, No Beginning WIP Inventory, Activity-Based Costing Lacy, Inc., produces a subassembly used in the production of hydraulic cylinders. The subassemblies are produced in three departments: Plate Cutting, Rod Cutting, and Welding. Materials are added at the beginning of the process. Overhead is applied using the following drivers and activity rates: Actual Usage Driver Rate (by Plate Cutting) Direct labor cost 160% of direct labor $732,000 Inspection hours $40 per hour 7,450 hours Purchase orders $1,000 per order 800 orders Other data for the Plate Cutting Department are as follows: Beginning work in process Units started 750,000 Direct materials cost $6,750,000 Units, ending work in process (100% materials; 64% conversion) 50,000 Required: 1. Prepare a physical flow schedule. If an answer is zero, enter "0".

Answer 1

Answer 1 & 2.
		Equivalent Units
Quantities	Physical Units	Materials	Conversion Costs
Units to be accounted for
Work in process - Beginning	-
Started into production	750,000
Total units	750,000
Units accounted for
Transferred out (750,000 Units - 50,000 Units)	700,000	700,000	700,000
Work in process, Ending	50,000	50,000	32,000
(100% materials, 64% conversion costs)		(50000*100%)	(50000*64%)
Equivalent units accounted for	750,000	750,000	732,000

Answer 3.: Computation of Unit cost
Unit costs	Materials	Conversion	Total
WIP, Beginning	-	-	-
Costs incurred during period	$6,750,000	3,001,200	9,751,250
Total Costs (a)	$6,750,000	3,001,200	9,751,250
Equivalent units (b)	750,000	732,000
Unit costs (a/b)	9.00	4.10	13.10

Working Note Computation of Conversion Cost Incurred
Direct Labor - $732,000 X 160%	$1,171,200
Inspection Cost - 7450 hrs X $40	$298,000
Purchase Orders - 800 Orders X $1000	$800,000
Total Overhead Cost	$2,269,200
Direct Labour Cost	$732,000
Total Conversion cost ( 2,269,200+732000)	$3,001,200

Answer 4 a & c.
	Materials	Conversion	Total
Equivalent Units of WIP (a)	50,000	32,000
Units Costs (b) ( $)	9.00	4.10
Cost of WIP - June 30    (axb) ( in $)	450,000	131,200	581,200
Transferred to Finished Goods (d)	700,000	700,000
Units Costs ( e) (in $)	9.00	4.10
Cost of Units transferred to Welding Deptt. (dXe) (in $)	6,300,000	2,870,000	9,170,000

Answer- 4 bJournal Entry
S. No.	Particulars	Debit	Credit
1	WIP - Welding	9,170,000
	To WIP - Plate		9,170,000