PART 2

Fen Furnishings produces brass handles for the furniture industry in a four-stage process Mixing, Moulding, Polishing and Packaging. Costs incurred in the Polishing Department during January are summarized as follows:

WIP - Polishing Process A/C

January 1 Bal. $ 0

Transfer from Moulding 20,000 1,310,000

Direct Materials Added 391,600

Direct Labour 638,000

Manufacturing Overhead 307,400

Normal losses are estimated to be 2% of input during the period. Inspection takes place during the processing operation, at which point damaged handles are separated from good handles and sold as scrap to local furniture manufacturers at $85 each.

At inspection, 2,000 handles were rejected as scrap. These units had reached the following degree of completion:

Transfer from Moulding	100%
Direct material added	40%
Conversion costs	20%

Work-in-progress at the end of January was 4,000 handles and had reached the following degree of completion:

Transfer from Moulding	100%
Direct material added	80%
Conversion costs	50%

Direct materials added and conversion costs are incurred uniformly throughout the process.

Required:

Required:

1. Compute the equivalent units and cost per equivalent units for direct materials (From Moulding &

Direct materials added) and conversion costs.

2. Compute the:
   • cost of the unexpected losses
   • total cost of the handles completed and transferred out of the Packaging Department
   • cost of ending work in process inventory in the Polishing Department
3. Complete the Work in Process Inventory Polishing Process T-account, clearly showing the ending balance.
4. Prepare the journal entries for the:
   • assignment of direct materials, direct labour incurred and the manufacturing overhead applied to the Polishing Process
   • cost of the units completed and transferred out to the Packaging Process
5. Given that 30% of the unexpected losses were as a result of pilferage, calculate Fen Furnishings true

loss associated with the Polishing Process.