At the beginning of September, the Cutting Department had 1,000 pennants in process that were 50% complete. The company had incurred $1,300 in direct materials cost and $1,250 in conversion cost to make them. During the month the department added $13,195 more of direct materials and $32,875 in conversion costs. A total of 9,150 pennants were finished during September and transferred to the Silk-screening Department. At the end of the month, 2,000 pennants that were 30% complete, remained in the Cutting Department.

Problem F2-9 - Process Costing and Equivalent Units Name: Course: Date: (Adapted from Institute of Management Accountants, CMA Examination, December 1992, Part 3, Question 8) Gray Manufacturing Company makes pennants for college and university athletic teams. The company uses a process costing system to accumulate product costs as the pennants move through the two stages of production: cutting and silk-screening. All materials are added at the beginning of both cutting and silk-screening processes, while conversion costs are applied evenly throughout the process. At the beginning of September, the Cutting Department had 1,000 pennants in process that were 50% complete. The company had incurred $1,300 in direct materials cost and $1,250 in conversion cost to make them. During the month the department added $13,195 more of direct materials and $32,875 in conversion costs. A total of 9,150 pennants were finished during September and transferred to the Silk-screening Department. At the end of the month, 2,000 pennants that were 30% complete, remained in the Cutting Department. Directions: a. Calculate the number of pennants started in the Cutting Department during September. Here's one way you could solve this problem: Units Beginning Inventory, September 1 Added to production Completed and transferred out Ending inventory, September 30 + = [Figure] [Formula] [Figure] [Figure] Or solve your own way: b. Calculate the equivalent units of production for the Cutting Department for September. c. What was the ending balance in the Cutting Department's Work in process Inventory account in dollars? d. How much cost was transferred from the Cutting Department to the Silk-screening Department during September? e. Reconcile both the physical units and the product costs for the Cutting Department in September