Chapter 18, Problem 12E

a.

To determine

Compute the number of sheets started by the Pressing Department in June.

Explanation of Solution

Process Costing:

It is a method of cost accounting used by an enterprise with processes categorised by continuous production. The cost for manufacturing those products are assigned to the manufacturing department before the averaged over units are being produced.

Compute the number of sheets started by the Pressing Department in June.

Particulars	Units
Units transferred to the Painting Department in June	1,500
Add: Ending inventory in Pressing Department, June 30	500
Total units in process during June	2,000
Less: Beginning inventory in Pressing Department, June 1	(300)
Units started by Pressing Department in June	1,700

(Table 1)

Therefore, the number of sheets started by the Pressing Department in June is 1,700 units.

b.

To determine

Compute the number of units started and completed by the Pressing Department in June.

Explanation of Solution

Compute the number of units started and completed by the Pressing Department in June.

Particulars	Units
Units transferred to the Painting Department in June	1,500
Units in beginning inventory in Pressing Department, June 1	(300)
Units started and completed by Pressing Department in June	1,200

(Table 2)

Therefore, the units started and completed by the pressing department during the month June is 1,200 units respectively.

c.

To determine

Compute the equivalent units of input resources for the Pressing Department in June.

Explanation of Solution

Compute the equivalent units of input resources for the Pressing Department in June.

Particulars	Input Resources
	Direct Materials	Conversion
To finish beginning inventory in process on June1:
Direct materials (300 units require 0% to complete)	0
Conversion (300 units require 80% to complete)		240
To start and complete 1,200 units in June	1,200	1,200
To start ending  inventory in process on  June 31:
Direct materials (500 units 100% complete)	500
Conversion (500 units 40% complete)		200
Equivalent units of resources in June	1,700	1,640

 (Table 3)

Therefore, the equivalent units of input resources for the Pressing Department in June are 1,700 and 1,640 units respectively

d.

To determine

Compute the cost per equivalent unit of input resource for the Pressing Department in June.

Explanation of Solution

Compute the cost per equivalent unit of input resource for the Cutting Department in June.

(Figure 1)

Therefore, the cost per equivalent unit of input resource for the Pressing Department for the month of June is $15 and $25 per unit respectively.

e.

To determine

Prepare journal entry to transfer pressed sheets from the Pressing Department to the Painting Department in June.

Explanation of Solution

Prepare journal entry to transfer pressed sheets from the Pressing Department to the Painting Department in June.

Date	Accounts title and explanation	Debit ($)	Credit ($)
	Work in process: Pressing Department  (3)	60,000
	Work in process: Painting Department		60,000
	(To record the transfer of 1,500 units to the  painting department in June  )

(Table 4)

• Work in process: Pressing department is an asset and there is an increase in the value of an asset. Hence, debit the work in process: pressing department by $60,000.
• Work in process: Painting department is an asset and there is a decrease in the value of an asset. Hence, credit the work in process: painting department by $60,000.

Working Notes:

Calculate the cost of direct materials during the month June:

$\begin{array}{c}\begin{array}{l}\text{Cost of direct materials}\\ \text{ during the month June}\end{array}\}\text{ = }\left(\text{Units started and completed}\right)\times \left(\begin{array}{l}\text{Cost per equivalent unit of}\\ \text{ Direct materials in June}\end{array}\right)\\ \text{=1,200}\times \$15\\ =\$18,000\end{array}$

(1)

Calculate the cost of conversion during the month June:

$\begin{array}{c}\begin{array}{l}\text{Cost of conversion}\\ \text{ during the month June}\end{array}\}\text{ = }\left(\begin{array}{l}\text{Units finished in process }+\\ \text{Units started and completed}\end{array}\right)\times \left(\begin{array}{l}\text{Cost per equivalent unit of}\\ \text{ conversion in June}\end{array}\right)\\ \text{=}\left(\text{240+1,200}\right)\times \$25\\ \text{=1,440}\times \$25\\ =\$36,000\end{array}$

(2)

Calculate the total cost of units transferred:

Particulars	Amount in $
Cost of beginning inventory, June1	6,000
June direct materials cost (1)	18,000
June conversion cost (2)	36,000
Total cost of units transferred in June	60,000

(Table 5)

(3)

f.

To determine

Calculate the total cost assigned to the Pressing Department’s ending inventory on June 30.

Explanation of Solution

Calculate the total cost assigned to the Pressing Department’s ending inventory on June 30.

Particulars	Amount in $
Work in Process: Cutting department, May 31:
Direct materials cost  (4)	7,500
Conversion cost  (5)	5,000
Ending inventory in process, May 31	12,500

(Table 6)

Therefore, the total cost assigned to the Pressing Department’s ending inventory on June 30 is $12,500.

Working Notes:

Calculate the cost of direct materials during the month end of June 30 for pressing department:

$\begin{array}{c}\begin{array}{l}\text{Cost of direct materials}\\ \text{ during the month June 30}\end{array}\}\text{ = }\left(\begin{array}{l}\text{Units started in process for}\\ \text{the month end June 30 }\end{array}\right)\times \left(\begin{array}{l}\text{Cost per equivalent unit of}\\ \text{ Direct materials in June }\end{array}\right)\\ \text{=500}\times \$15\\ \text{=\$7,500}\end{array}$

(4)

Calculate the cost of conversion during the month end of June 30 for pressing department:

$\begin{array}{c}\begin{array}{l}\text{Cost of conversion}\\ \text{ during the month June 30}\end{array}\}\text{ = }\left(\begin{array}{l}\text{Units started in process for}\\ \text{the month end June 30}\end{array}\right)\times \left(\begin{array}{l}\text{Cost per equivalent unit of}\\ \text{ conversion in June}\end{array}\right)\\ \text{=200}\times \$25\\ \text{=\$5,000}\end{array}$

(5)