Five-step process: materials added at different points (Learning Objectives 1,2,3) Ply-Wall produces exterior siding for homes. The Preparation Department begins with wood, which is chopped into small bits. At the end of the process, an adhesive is added. Then the wood/adhesive mixture goes on to the Compression Department, where the wood is compressed into sheets. Assume conversion costs are added evenly throughout the preparation process. Suppose that April data for the Preparation Department are as follows (in millions):

Requirements 1. Draw a time line for the Preparation Department, similar to Exhibit 4-6.
2. Use the time line to help you summarize the flow of physical units and compute the equivalent units for direct materials and for conversion costs. (Hint: Each direct material added at a different point in the production process requires its own equivalent-unit computation.)
3. Compute the cost per equivalent unit for each cost category.
4. Compute the total costs of the units (sheets)

a. Completed and transferred out to the Compression Department

b. In the Preparation Department’s ending work in process inventory 5. Prepare the journal entry to record the cost of the sheets completed and trans¬ ferred out to the Compression Department.
6. Post the journal entries to the Work in Process Inventory—Preparation T-account. What is the ending balance?
7. What is the primary purpose of the work in Requirements 1 through 4?

Transcribed Image Text:

Sheets Beginning work in Costs Beginning work in process inventory.... 0 sheets process inventory $ 0 Started production 3,000 sheets Costs added during April: Completed and Wood................ 2,700 transferred out to Adhesive............ 1,365 Compression in April......... 1,950 sheets Direct labor 629 Manufacturing Ending work in overhead..... 1,267 process inventory Total costs..... $5,961 (40% of the way through the preparation process)....... 1,050 sheets