Q45PGB - Horngren'S Financial And Managerial Accounting

Question

Preparing a production cost report, second department, with beginning WIP and transferred in costs; journal entries; FIFO method Work Problem P18-40B using the FIFO method. The Mixing Department beginning work in process of 400 units is 80% complete as to both direct materials and conversion costs. Round equivalent unit costs to four decimal places. Round all other costs to the nearest dollar.

 

Step-by-Step Solution

Answer

1. Production cost report

Production Cost Report- Department 2
		Equivalent unit of production
UNITS	Physical units	Direct material	Conversion costs	Total
Units to account for:
Beginning WIP	400
Started in production	4,600
Total units to account for	5,000
Units accounted for:
Completed and transferred	4,500	4,180	4,180
Ending WIP	500	100	100
Total units accounted for	5,000	4,280	4,280
COSTS		Direct material	Conversion costs	Total costs
Costs to account for:
Beginning WIP		$475	$575	$1,050
Cost added during the period		5,045	5,865	10,910
Total cost to account for		5,520	6,440	11,960
Divided by: total EUP		4,280	4,280
Cost per equivalent unit		$1.29	$1.50
Costs accounted for:
-       Completed and transferred out		5,391 (4,180 x $1.29)	6,290 (4,180x$1.50)	11,681
-       Ending WIP		129 (100x $1.29)	150 (100x$1.50)	279
Total costs accounted for		5,520	6,440	11,960

2. The journal entries to show the transaction affecting the mixing department are shown in step 4.

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

A production cost report shows the direct material, and the conversion cost separately of a product that involves a certain number of manufacturing processes.

Step 2: Equivalent unit of production for direct material cost

Particulars	EUP
Opening WIP (400 x 20%)	80
Completed and transferred (4,500 – 400) x 100%	4,100
Ending WIP (500 x 20%)	100
Total EUP	4,280

Step 3: Equivalent unit of production for conversion costs

Particulars	EUP
Opening WIP (400 x 20%)	80
Completed and transferred (4,500 – 400) x 100%	4,100
Ending WIP (500 x 20%)	100
Total EUP	4,280

Step 4: Journal Entries

Date	Particulars	Debit ($)	Credit ($)
1.	WIP Inventory-Mixing department	5,045
	Raw material		5,045
2.	WIP inventory-Mixing department	2,900
	Wages payable		2,900
3.	WIP inventory – mixing department	2,965
	Manufacturing overhead		2,965
4.	WIP inventory-cooking department	11,681
	WIP inventory – mixing department		11,681