Direct materials (230 × $132) $30,360
Conversion (230 × 60% × $18) 2,484
$32,844
During May, the Casting Department was charged $350,000 for 2,500 pounds of alloy and $19,840 for direct labor. Factory overhead is applied to the department at a rate of 150% of direct labor. The department transferred out 2,530 pounds of finished castings to the Machining Department. The May 31 inventory in process was 44% complete as to conversion.
a. Prepare the following May journal entries for the Casting Department:
1. The materials charged to production.
2. The conversion costs charged to production.
3. The completed production transferred to the Machining Department.
b. Determine the Work in Process—Casting Department May 31 balance.
c. Compute and evaluate the change in the costs per equivalent unit for direct materials and conversion from the previous month (April).
Answer:
a. 1. Work in Process—Casting Department 350,000
Materials—Alloy 350,000
2.
Work in Process—Casting Department 49,600
Wages Payable 19,840
Factory Overhead* 29,760
3.
Work in Process—Machining Department* 402,684
Work in Process—Casting Department 402,684
* Supporting calculations:
Cost of 2,530 transferred-out pounds:
Inventory in process, May 1…………………………………………………………… $ 32,844
Cost to complete May 1 inventory:
92 pounds × $20/lb. (see calculations below)……………………………………… 1,840
Pounds started and completed in May
[2,300 lbs. × ($140 + $20)]…………………………………………………………… 368,000
Transferred to Machining Department……………………………………………… $402,684
Supporting equivalent unit and cost per equivalent unit calculations:
Whole Units
Equivalent Units
Materials Conversion
Inventory in process, May 1
(60% completed) 230 0 921
Started and completed in May 2,3002 2,300 2,300
Transferred to Machining Department
in May 2,530 2,300 2,392
Inventory in process, May 31
(44% completed) 2003 200 884
Total 2,730 2,500 2,480
1 230 units × (1 – 60%)
2 2,530 units – 230 units
3 230 units + 2,500 units – 2,530 units
4 200 units × 44%
Cost per equivalent unit of materials:
Cost per equivalent unit of conversion:
$350,000
2,500
$49,600
2,480
= $140 per pound
= $20 per pound
b. $29,760; determined as follows:
Direct materials (200 × $140)……………………………… $28,000
Conversion (200 × 44% × $20)…………………………… 1,760
$29,760
or $29,760 = $32,844 + $350,000 + $49,600 – $402,684
c. Materials: From current period .............................................. $140
From beginning inventory .................................... 132
Increase................................................................... $ 8
Conversion: From current period .............................................. $ 20
From beginning inventory .................................... 18
Increase................................................................... $ 2
The cost per equivalent unit of materials increased by $8 per pound, and the cost per equivalent unit of conversion cost increased by $2 per pound. Management may wish to investigate the causes for these increases in cost.