Work in process, August 1, 700 pounds, 20% completed $ 3,479*
*Direct materials (700 × $4.70) $3,290
Conversion (700 × 20% × $1.35) 189
$3,479
Coffee beans added during August, 14,300 pounds 65,780
Conversion costs during August 21,942
Work in process, August 31, 400 pounds, 42% completed ?
Goods finished during August, 14,600 pounds ?
All direct materials are placed in process at the beginning of production.
a. Prepare a cost of production report, presenting the following computations:
1. Direct materials and conversion equivalent units of production for August.
2. Direct materials and conversion costs per equivalent unit for August.
3. Cost of goods finished during August.
4. Cost of work in process at August 31, 2014.
b. Compute and evaluate the change in cost per equivalent unit for direct materials and conversion from the previous month (July).
Answer:
MORNING BREW COFFEE COMPANY
Cost of Production Report—Roasting Department
For the Month Ended August 31, 2014
UNITS
Whole
Units
Equivalent Units
Direct
Materials
(1)
Conversion
(1)
Units charged to production:
Inventory in process, August 1 700
Received from materials storeroom 14,300
Total units accounted for by the
Roasting Department 15,000
Units to be assigned costs:
Inventory in process, August 1
(20% completed) 700 0 5601
Started and completed in August 13,9002 13,900 13,900
Transferred to finished goods in August 14,600 13,900 14,460
Inventory in process, August 31
(42% completed) 400 400 1683
Total units to be assigned costs 15,000 14,300 14,628
1 700 units × (1 – 20%)
2 14,300 units – 400 units
3 400 units × 42%
Costs
Direct
Materials Conversion Total
Costs per equivalent unit:
Total costs for August in Roasting
Department $65,780 $21,942
Total equivalent units ÷ 14,300 ÷ 14,628
Cost per equivalent unit (2) $ 4.60 $ 1.50
Costs assigned to production:
Inventory in process, August 1 $ 3,479
Costs incurred in August 87,7221
Total costs accounted for by the
Roasting Department $91,201
Costs allocated to completed and
partially completed units:
Inventory in process, August 1 balance $ 3,479
To complete inventory in process,
August 1 $ 0 $ 8402 840
Cost of completed August 1 work in
process $ 4,319
Started and completed in August 63,9403 20,8504 84,790
Transferred to finished goods in August (3) $89,109
Inventory in process, August 31 (4) 1,8405 2526 2,092
Total costs assigned by the Roasting
Department $91,201
1 $65,780 + $21,942
2 560 units × $1.50
3 13,900 units × $4.60
4 13,900 units × $1.50
5 400 units × $4.60
6 168 units × $1.50
b. Materials: From current period…………………………………………………… $ 4.60
From beginning inventory…………………………………………… 4.70
Decrease………………………………………………………………… $(0.10)
Conversion: From current period………………………………………………… $ 1.50
From beginning inventory…………………………………………… 1.35
Increase………………………………………………………………… $ 0.15
The cost per equivalent unit of materials decreased by $0.10 per pound, and the cost per equivalent unit of conversion cost increased by $0.15 per pound. Management may wish to investigate the causes for the increase in the conversion cost.