Question

Equivalent Units and Related Costs; Cost of Production Report; Entries Dover Chemical Company manufactures specialty chemicals by a series of three processes, all materials being introduced in the Distilling Department. From the Distilling Department, the materials pass through the Reaction and Filling departments, emerging as finished chemicals. The balance in the account Work in Process—Filling was as follows on January 1:

Work in Process-Filling Department (5,100 units, 40 % completed): Direct materials (5,100 x $18.4) $93,840 Conversion (5,100 x 40 % x $12) 24,480 $118,320 The following costs were charged to Work in Process-Filling during January: Direct materials transferred from Reaction Department: 65,800 units at $18.2 a unit $1,197,560 Direct labor 407,170 Factory overhead 391,198 During January, 65,200 units of specialty chemicals were completed. Work in Process-Filling Department on January 31 was 5,700 units, 40% completed. Required: 1. Prepare a cost of production report for the Filling Department for January. If an amount is zero, enter "O". If required, round your cost per equivalent unit answers to two decimal places. Dover Chemical Company Cost of Production Report-Filling Department For the Month Ended January 31 Unit Information Units charged to production: Inventory in process, January 1 Received from Reaction Department Total units accounted for by the Filling Department Units to be assigned costs: Equivalent Units Whole Direct Materials Conversion Units Inventory in process, January 1 Started and completed in January Transferred to finished goods in January Inventory in process, January 31 Total units to be assigned costs Cost Information Cost per equivalent unit Direct Materials Conversion Total costs for January in Filling Department Total equivalent units Cost per equivalent unit Costs assigned to production: Direct Total Materials Conversion Inventory in process, January 1 Costs incurred in January Total costs accounted for by the Filling Department Costs allocated to completed and partially completed units: Inventory in process, January 1 balance To complete inventory in process, January 1 Cost of completed January 1 work in process Started and completed in January Transferred to finished goods in January Inventory in process, January 31 Total costs assigned by the Filling Department 2, Journalize the entries for (1) costs transferred from Reaction to Filling and (2) the cost transferred from Filling to Finished Goods (1) (2) 3. Determine the increase or decrease in the cost per equivalent unit from December to January for direct materials and conversion costs. If required, round your answers to two decimal places. Increase or Decrease Amount Change in direct materials cost per equivalent unit Change in conversion cost per equivalent unit 4. Discuss the uses of the cost of production report and the results of part (3). also be used bo contrel costs by holding esch department head responsible for the units entering preduction and the costs ineurred in the department. Any dfferences in The cost of production report may be used as the basis for allocating product costs beteene The renore e and unit product costs from one month to anothar, such those in part (3) can be studied carafully and amy significant differances imestigated.

Answer 1

Solution 1:

Dover Chemical Company
Assembly Department
Computation of Equivalent unit (FIFO)
Particulars	Physical units	Material	Conversion
Units to be accounted for:
Beginning WIP Inventory	5100
Units started this period	65800
Total unit to be accounted for	70900
Units Accounted for:
Units completed and transferred out
From beginning inventory Material - 0% Conversion - 60%	5100	0	3060
Started and completed currently	60100	60100	60100
Transferred to finished goods	65200	60100	63160
Units in ending WIP Material - 100% Conversion - 40%	5700	5700	2280
Total units accounted for	70900	65800	65440

Dover Chemical Company
Assembly Department
Computation of Cost per Equivalent unit
Particulars	Total cost	Material	Conversion
Current period cost	$1,995,928.00	$1,197,560.00	$798,368.00
Equivalent units		65800	65440
Cost per equivalent unit		$18.20	$12.20

Dover Chemical Company
Assembly Department
Producton cost report - FIFO
Particulars	Total cost	Material	Conversion
Cost Accounted for :
Cost assigned to unit transferred out:
Cost from beginning WIP Inventory	$118,320	$93,840	$24,480
Current cost added to complete beginning WIP:
Material	$0	$0
Conversion (3060 * $12.20)	$37,332		$37,332
Total Cost from beginning inventory	$155,652	$93,840	$61,812
Current cost of unit started and completed:
Material (60100*$18.20)	$1,093,820	$1,093,820
Conversion (60100*12.20)	$733,220		$733,220
Total cost of unit started and completed	$1,827,040	$1,093,820	$733,220
Total cost of unit transferred out	$1,982,692	$1,187,660	$795,032
Cost assigned to ending WIP:
Material (5700*$18.20)	$103,740	$103,740
Conversion (5700*$12.20)	$27,816		$27,816
Total ending WIP inventory	$131,556	$103,740	$27,816
Total cost accounted for	$2,114,248	$1,291,400	$822,848

solution 2:

Journal Entries - Dover Chemical Company
S. No.	Particulars	Debit	Credit
1	Work In Process - Filling Department Dr	$1,197,560.00
	To Work In Process - Reaction Department		$1,197,560.00
	(Being cost of goods completed in reaction transferred to Filling department)
2	Finished Goods Inventory Dr	$1,982,692.00
	To Work In Process - Filling Department		$1,982,692.00
	(Being completed units transferred to finished goods)

Solution 3:

Particulars	Increase or Decrease	Amount
Change in direct materials cost per equivalent unit ($18.20 - $18.40)	Decrease	$0.20
Change in conversion cost per equivalent unit ($12.20 - $12)	Increase	$0.20

Solution 4:

The cost of production report may be used as the basis for allocating product costs between work in process and Transferred out goods. The report can also be used to control costs by holding each department head responsible for the units entering production and costs incurred in the department. Any differences in unit product costs from one month to another such as those in part (3) can be studied carefully and any significant differences investigated.