Q35PGA - Horngren'S Financial And Managerial Accounting

Question

Carla Carpet manufactures broadloom carpet in seven processes: spinning, dyeing, plying, spooling, tufting, latexing, and shearing. In the Dyeing Department, direct materials (dye) are added at the beginning of the process. Conversion costs are incurred evenly throughout the process. Information for November 2018 follows:

UNITS
Beginning work-in-process inventory	70 rolls
Transferred in from spinning department during November	550 rolls
Completed during November	480 rolls
Ending work in process inventory (80% complete for conversion work)	140 rolls
COSTS
Beginning work in process inventory (transferred in costs, \(4,000, Materials costs, \)1,400 conversion costs, \(5,300)	\)10,700
Transferred in from the spinning department	23,280
Material costs added during November	14,100
Coversion cost added during November (manufacturing wages, \(8,725; manufacturing overhead allocated, \)43,991)	52,716

Requirements

1. Prepare the November production cost report for Carla’s Dyeing Department.

The company uses the weighted-average method.

2. Journalize all transactions affecting Carla’s Dyeing Department during November, including the entries that have already been posted. Assume labor costs are accrued and not yet paid.

Step-by-Step Solution

Answer

1. Production cost report

CARLA’s CARPET MANUFACTURING
		Equivalent unit of production
UNITS	Physical units	Transferred in	Direct materials	Conversion costs	Total
Units to account for:
Beginning WIP	70
Transferred in from spinning department	550
Total units to account for	620
Units accounted for:
Completed	480	480	480	480
Ending WIP	140	140	140	112
Total units accounted for	620	620	620	592
COSTS		Transferred in	Direct materials	Conversion costs	Total costs
Costs to account for:
Beginning WIP		$4,000	$1,400	$5,300	$10,700
Cost added during the period		23,280	14,100	52,716	90,096
Total cost to account for		27,280	15,500	58,016	100,796
Divided by: total EUP		620	620	592
Cost per equivalent unit		$44	$25	$98
Costs accounted for:
-       Completed and transferred out		21,120 (480 x $44)	12,000 (480x$25)	47,040 (480x$98)	80,160
-       Ending WIP		6,160 (140x $44)	3,500 (140x$25)	10,976 (112x$98)	20,636
Total costs accounted for		27,280	15,500	58,016	100,796

2. The journal entries to show the transactions affecting Carla’s dyeing department are recorded in step 5.

Step-by-Step Solution: Step 1: Production Cost Report

 A production cost report shows the several costs of the products. Companies using a process costing system need to make a production cost report.

Step 2: Equivalent unit of production for transferred in

$$\begin{gathered} \mathbf{EUP}\mathbf{ }\mathbf{for}\mathbf{ }\mathbf{Transferred}\mathbf{ }\mathbf{in}\mathbf{=}(\mathbf{Completed}\mathbf{ }\mathbf{units}\mathbf{\times }\mathbf{Completion}\mathbf{\%})\mathbf{+}(\mathbf{Ending}\mathbf{ }\mathbf{WIP}\mathbf{ }\mathbf{units}\mathbf{\times }\mathbf{Completion}\mathbf{\%}) \\ \mathbf{=}(\mathbf{480}\mathbf{\times }\mathbf{100}\mathbf{\%})\mathbf{+}(\mathbf{140}\mathbf{\times }\mathbf{100}\mathbf{\%}) \\ \mathbf{=}\mathbf{620} \end{gathered}$$

Step 3: Equivalent unit of production for direct materials

$$\begin{gathered} \mathbf{EUP}\mathbf{ }\mathbf{for}\mathbf{ }\mathbf{Directmaterials}\mathbf{=}(\mathbf{Completed}\mathbf{ }\mathbf{units}\mathbf{\times }\mathbf{Completion}\mathbf{\%})\mathbf{+}(\mathbf{Ending}\mathbf{ }\mathbf{WIPunits}\mathbf{\times }\mathbf{Completion}\mathbf{\%}) \\ \mathbf{=}(\mathbf{480}\mathbf{\times }\mathbf{100}\mathbf{\%})\mathbf{+}(\mathbf{140}\mathbf{\times }\mathbf{100}\mathbf{\%}) \\ \mathbf{=}\mathbf{620} \end{gathered}$$

Step 4: Equivalent unit of production for conversion costs

$$\begin{gathered} \mathbf{EUP}\mathbf{ }\mathbf{for}\mathbf{ }\mathbf{Conversion}\mathbf{ }\mathbf{cost}\mathbf{=}(\mathbf{Completed}\mathbf{ }\mathbf{units}\mathbf{\times }\mathbf{Completion}\mathbf{\%})\mathbf{+}(\mathbf{Ending}\mathbf{ }\mathbf{WIPunits}\mathbf{\times }\mathbf{Completion}\mathbf{\%}) \\ \mathbf{=}(\mathbf{480}\mathbf{\times }\mathbf{100}\mathbf{\%})\mathbf{+}(\mathbf{140}\mathbf{\times }\mathbf{80}\mathbf{\%}) \\ \mathbf{=}\mathbf{592} \end{gathered}$$

Step 5: Journal entries

Date	Particulars	Debit ($)	Credit ($)
1.	WIP Inventory – Dyeing department	23,280
	WIP Inventory – Spinning department		23,280
2.	WIP Inventory – Dyeing department	14,100
	Raw material		14,100
3.	WIP Inventory – Dyeing department	8,725
	Wages payable		8,725
4.	WIP Inventory – Dyeing department	43,991
	Manufacturing overhead		43,991
5.	WIP Inventory – Plying department	80,160
	WIP Inventory – Dyeing department		80,160