Cost per Equivalent Unit: Average Cost Method

The following information concerns production in the Forging Department for April. The Forging Department uses the average cost method.

ACCOUNT Work in ProcessForging Department							ACCOUNT NO.
Date		Item	Debit		Credit		Balance
							Debit		Credit
April	1	Bal., 1,300 units, 40% completed					4,200
	30	Direct materials, 30,000 units	150,000				154,200
	30	Direct labor	64,600				218,800
	30	Factory overhead	35,400				254,200
	30	Goods transferred, 29,800 units			?		?
	30	Bal., 1,500 units, 80% completed					?

a. Determine the cost per equivalent unit. Round your answer to the nearest cent. $ per equivalent unit

b. Determine the cost of the units transferred to Finished Goods. $

c. Determine the cost of units in ending Work in Process. $

Cost of Production Report: Average Cost Method

Use the average cost method with the following data:

Work in process, January 1, 4,500 units, 10% completed	$29,925
Materials added during January from Weaving Department, 85,100 units	549,746
Direct labor for January	141,652
Factory overhead for January	111,922
Goods finished during January (includes goods in process, January 1), 83,300 units
Work in process, January 31, 6,300 units, 70% completed

Prepare a cost of production report for the Cutting Department of Dalton Carpet Company for January using the average cost method. If required, round your cost per equivalent unit answer to two decimal places.

Dalton Carpet Company
Cost of Production Report-Cutting Department
For the Month Ended January 31
Unit Information
Units charged to production:
Inventory in process, January 1
Received from Weaving Department
Total units accounted for by the Cutting Department
Units to be assigned costs:
	Whole Units	Equivalent Units of Production
Transferred to finished goods in January
Inventory in process, January 31
Total units to be assigned costs
Cost Information
Cost per equivalent unit:
		Costs
Total costs for January in Cutting Department		$
Total equivalent units
Cost per equivalent unit		$
Costs assigned to production:
Inventory in process, January 1		$
Costs incurred in January
Total costs accounted for by the Cutting Department		$
Costs allocated to completed and partially completed units:
Transferred to finished goods in January		$
Inventory in process, January 31
Total costs assigned by the Cutting Department		$

The debits to Work in ProcessRoasting Department for Morning Brew Coffee Company for August, together with information concerning production, are as follows:

Work in process, August 1, 600 pounds, 60% completed				$3,192*
	*Direct materials (600 X $4.3)	$2,580
	Conversion (600 X 60% X $1.7)	612
		$3,192
Coffee beans added during August, 19,000 pounds				80,750
Conversion costs during August				33,552
Work in process, August 31, 1,000 pounds, 40% completed				?
Goods finished during August, 18,600 pounds				?

All direct materials are placed in process at the beginning of production.

a. Prepare a cost of production report, presenting the following computations:

Direct materials and conversion equivalent units of production for August.

Direct materials and conversion costs per equivalent unit for August.

Cost of goods finished during August.

Cost of work in process at August 31.

If an amount is zero, enter in "0". For the cost per equivalent unit, round your answer to two decimal places.

Morning Brew Coffee Company
Cost of Production Report-Roasting Department
For the Month Ended August 31
Unit Information
Units charged to production:
Inventory in process, August 1
Received from materials storeroom
Total units accounted for by the Roasting Department
Units to be assigned costs:
		Equivalent Units
	Whole Units	Direct Materials (1)	Conversion (1)
Inventory in process, August 1
Started and completed in August
Transferred to finished goods in August
Inventory in process, August 31
Total units to be assigned costs
Cost Information
Cost per equivalent unit:
		Direct Materials	Conversion
Total costs for August in Roasting Department		$	$
Total equivalent units
Cost per equivalent unit (2)		$	$
Costs assigned to production:
	Direct Materials	Conversion	Total
Inventory in process, August 1			$
Costs incurred in August
Total costs accounted for by the Roasting Department			$
Costs allocated to completed and partially completed units:
Inventory in process, August 1 balance			$
To complete inventory in process, August 1	$	$
Cost of completed August 1 work in process			$
Started and completed in August
Transferred to finished goods in August (3)			$
Inventory in process, August 31 (4)
Total costs assigned by the Roasting Department			$

b. Compute and evaluate the change in cost per equivalent unit for direct materials and conversion from the previous month (July). If required, round your answers to the nearest cent.

	Increase or Decrease	Amount
Change in direct materials cost per equivalent unit		$
Change in conversion cost per equivalent unit		$

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 ProcessFilling was as follows on January 1:

Work in ProcessFilling Department
(4,700 units, 80% completed):
	Direct materials (4,700 x $16.9)	$79,430
	Conversion (4,700 x 80% x $11)	41,360
		$120,790

The following costs were charged to Work in ProcessFilling during January:

Direct materials transferred from Reaction
	Department: 60,600 units at $16.7 a unit	$1,012,020
Direct labor		333,680
Factory overhead		320,590

During January, 60,100 units of specialty chemicals were completed. Work in ProcessFilling Department on January 31 was 5,200 units, 30% completed.

Required:

1. Prepare a cost of production report for the Filling Department for January. If an amount is zero, enter "0". 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 Units	Direct Materials	Conversion
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 Materials	Conversion	Total
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).

The cost of production report may be used as the basis for allocating product costs between and . The report can also be used to control costs by holding each department head responsible for the units entering production and the 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.