Work in process, January 1, 1,400 units, 75% completed $ 22,960*
*Direct materials (1,400 × $12.65) $17,710
Conversion (1,400 × 75% × $5.00) 5,250
$22,960
Materials added during January from Weaving Department, 58,000 units $742,400
Direct labor for January 134,550
Factory overhead for January 151,611
Goods finished during January (includes goods in process, January 1), 56,200 units —
Work in process, January 31, 3,200 units, 30% completed —
a. Prepare a cost of production report for the Cutting Department.
b. Compute and evaluate the change in the costs per equivalent unit for direct materials and conversion from the previous month (December).
Answer:
a.
KARACHI CARPET COMPANY
Cost of Production Report—Cutting Department
For the Month Ended January 31, 2014
UNITS
Whole
Units
Equivalent Units
Direct
Materials Conversion
Units charged to production:
Inventory in process, January 1 1,400
Received from Weaving Department 58,000
Total units accounted for by the
Cutting Department 59,400
Units to be assigned cost:
Inventory in process, January 1
(75% completed) 1,400 0 3501
Started and completed in January 54,8002 54,800 54,800
Transferred to finished goods in
January 56,200 54,800 55,150
Inventory in process, January 31
(30% completed) 3,200 3,200 9603
Total units to be assigned cost 59,400 58,000 56,110
1 1,400 units × (1 – 75%)
2 58,000 units – 3,200 units
3 3,200 units × 30%
Costs
Direct
Materials Conversion Total
Costs per equivalent unit:
Total costs for January in Cutting
Department $742,400 $286,1611
Total equivalent units ÷ 58,000 ÷ 56,110
Cost per equivalent unit $ 12.80 $ 5.10
Costs assigned to production:
Inventory in process, January 1 $ 22,960
Costs incurred in January 1,028,5612
Total costs accounted for by the
Cutting Department $1,051,521
Cost allocated to completed and
partially completed units:
Inventory in process, January 1 balance $ 22,960
To complete inventory in process,
January 1 $ 1,7853 1,785
Cost of completed January 1 work in $ 24,745
process
Started and completed in January $701,4404 279,4805 980,920
Transferred to finished goods in
January $1,005,665
Inventory in process, January 31 40,9606 4,8967 45,856
Total costs assigned by the Cutting
Department $1,051,521
1 $134,550 + $151,611
2 $742,400 + $134,550 + $151,611
3 350 units × $5.10
4 54,800 units × $12.80
5 54,800 units × $5.10
6 3,200 units × $12.80
7 960 units × $5.10
b. Materials: From current period……………………………………………… $12.80
From beginning inventory……………………………………… 12.65
Increase……………………………………………………………
Conversion: From current period………………………………………………
From beginning inventory………………………………………
Increase……………………………………………………………
$ 0.15
$ 5.10
5.00
$ 0.10
The cost per equivalent unit of materials increased by $0.15 per unit, and the cost per equivalent unit of conversion cost increased by $0.10 per unit. Management may wish to investigate the causes for these changes in cost.