EX 20-19 Cost of production and journal entries

Lighthouse Paper Company manufactures newsprint. The product is manufactured in two departments, Papermaking and Converting. Pulp is first placed into a vessel at the beginning of papermaking production. The following information concerns production in the Papermaking Department for March:


Mar. 1
31
31
31
31
31
Bal., 2,600 units, 35% completed
Direct materials, 105,000 units
Direct labor
Factory overhead
Goods transferred, 103,900 units
Bal., 3,700 units, 80% completed
9,139
339,889
380,449
435,244
ACCOUNT Work in Process—Papermaking Department
ACCOUNT NO.
Debit Credit
330,750
40,560
54,795
Balance
?
?
?


a. Prepare the following March journal entries for the Papermaking Department:
1. The materials charged to production.
2. The conversion costs charged to production.
3. The completed production transferred to the Converting Department.
b. Determine the Work in Process—Papermaking Department March 31 balance.


Answer:

a. 1. Work in Process—Papermaking Department 330,750
Materials—Pulp 330,750
2.
 Work in Process—Papermaking Department 95,355
Wages Payable 40,560
Factory Overhead 54,795
3.
 Work in Process—Converting Department* 420,925
Work in Process—Papermaking Department 420,925
* Supporting calculations:
Cost of 103,900 transferred-out units:
Inventory in process, March 1………………………………………………………… $ 9,139
Cost to complete March 1 inventory:
1,690 units × $0.90/unit (see calculations below)………………………………… 1,521
Pounds started and completed in March
[101,300 units × ($3.15 + $0.90)]…………………………………………………… 410,265
Transferred to Converting Department……………………………………………… $420,925
Supporting equivalent unit and cost per equivalent unit calculations:
Whole Units
Equivalent Units
Materials Conversion
Inventory in process, March 1
(35% completed) 2,600 0 1,6901
Started and completed in March 101,300 101,300 101,300
Transferred to Converting Department
in March 103,900 101,300 102,990
Inventory in process, March 31
(80% completed) 3,700 3,700 2,9602
Total 107,600 105,000 105,950
1 2,600 units × (1 – 35%)
2 3,700 units × 80%
Cost per equivalent unit of materials:
Cost per equivalent unit of conversion:
b. $14,319; determined as follows:
$330,750
105,000
$95,355
105,950
= $3.15 per unit
= $0.90 per unit
Direct materials (3,700 × $3.15)……………… $11,655
Conversion (3,700 × 80% × $0.90)…………… 2,664
$14,319
or $14,319 = $9,139 + $330,750 + $95,355 – $420,925