Chapter 18, Problem 7AP

a. 1

To determine

Prepare a schedule showing units started and completed in the Molding Department during April.

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.

Prepare a schedule showing units started and completed in the Molding Department during April.

Particulars	Units
Flow of physical units: Molding Department
Units in beginning inventory, April 1	2,800
Units started in April	48,200
Units in process during April	51,000
Units in ending inventory, April 30	(3,400)
Units transferred to Finishing Department in April	47,600
Units in beginning inventory, April 1	(2,800)
Units started and completed in April	44,800

(Table 1)

Therefore, the units started and completed in the Molding Department during April is 44,800.

a. 2

To determine

Compute the equivalent units of direct materials and conversion for the Molding Department in April.

Explanation of Solution

Compute the equivalent units of direct materials and conversion for the Molding Department in April.

Particulars	Input Resources
	Direct Materials	Conversion
To finish units in process on April 1:
Direct materials (2,800 units require 10% to complete)	280
Conversion (2,800 units require 70% to complete)		1,960
To start and complete 44,800 units in April	44,800	44,800
To start units in process on April 30:
Direct materials (3,400 units 80% complete)	2,720
Conversion (3,400 units 20% complete)		680
Equivalent units of resources in April	47,800	47,440

 (Table 2)

Therefore, the equivalent units of direct materials and conversion for the Molding Department in April are 47,800 and 47,440.

a. 3

To determine

Calculate the cost per equivalent unit of input resource for the Molding Department during April.

Explanation of Solution

Calculate the cost per equivalent unit of input resource for the Molding Department during April.

Particulars	Direct Materials in $	Conversion Cost in $
Cost per equivalent unit in April :
Costs incurred by Molding Department in April (A)	669,200	521,840
Equivalent units in April (B)	47,800	47,440
Cost per equivalent unit in April (A÷B)	14	11

(Table 3)

Therefore, the cost per equivalent unit of input resource for the Molding Department during April is $14 per unit and $11 per unit respectively.

a. 4

To determine

Prepare journal entry to record the units transferred from the Molding Department to the Finishing Department during April.

Explanation of Solution

Prepare journal entry to record the transfer units from the Molding Department to the Finishing Department during April.

Date	Accounts title and explanation	Debit ($)	Credit ($)
	Work in process: Finishing Department  (4)	1,190,000
	Work in process: Molding Department		1,190,000
	(To record the transfer of 47,600 units to the Finishing department in April)

(Table 4)

• Work in process: Finishing department is an asset and there is an increase in the value of an asset. Hence, debit the work in process: finishing department by $1,190,000.
• Work in process: Molding department is an asset and there is a decrease in the value of an asset. Hence, credit the work in process: molding department by $1,190,000.

Working Notes:

Calculate the cost of beginning inventory:

$\begin{array}{c}\text{Cost of beginning inventory = }\left(\begin{array}{l}\text{ Direct materials cost carried }\\ \text{forward from molding }\\ \text{department during}\\ \text{ March 31}\end{array}\right)\times \left(\begin{array}{l}\text{Conversion cost carried }\\ \text{forward from molding }\\ \text{department during }\\ \text{March 31}\end{array}\right)\\ \text{=\$33,340+\$11,180}\\ \text{=\$44,520}\end{array}$

(1)

Calculate the cost of direct materials during the month April:

$\begin{array}{c}\begin{array}{l}\text{Cost of direct materials}\\ \text{ during the month April}\end{array}\}\text{ = }\left(\begin{array}{l}\text{Units finished in process }+\\ \text{Units started and completed}\end{array}\right)\times \left(\begin{array}{l}\text{Cost per equivalent unit of}\\ \text{ Direct materials in April}\end{array}\right)\\ \text{=}\left(\text{280+44,800}\right)\times \$14\\ \text{=45,080}\times \$14\\ =\$631,120\end{array}$

(2)

Calculate the cost of conversion during the month April:

$\begin{array}{c}\begin{array}{l}\text{Cost of conversion}\\ \text{ during the month April}\end{array}\}\text{ = }\left(\begin{array}{l}\text{Units finished in process }+\\ \text{Units started and completed}\end{array}\right)\times \left(\begin{array}{l}\text{Cost per equivalent unit of}\\ \text{ conversion in April}\end{array}\right)\\ \text{=}\left(\text{1,960+44,800}\right)\times \$14\\ \text{=46,760}\times \$11\\ =\$514,360\end{array}$

(3)

Calculate the total cost of units transferred:

Particulars	Amount in $
Cost of beginning inventory, April 1 (1)	44,520
April direct materials cost (2)	631,120
April conversion cost (3)	514,360
Total cost of units transferred	1,190,000

(Table 5)

(4)

a.5

To determine

Compute the costs assigned to ending inventory in the Molding Department on April 30.

Explanation of Solution

Compute the costs assigned to ending inventory in the Molding Department on April 30.

Particulars	Amount in $
Work in Process: Molding Department, April 30:
Direct materials cost  (5)	38,080
Conversion cost  (6)	7,480
Ending inventory in process, April 30	45,560

(Table 6)

Working Notes:

Calculate the cost of direct materials during the month end of April 30:

$\begin{array}{c}\begin{array}{l}\text{Cost of direct materials}\\ \text{ during the month April 30}\end{array}\}\text{ = }\left(\begin{array}{l}\text{Units started in process for}\\ \text{the month end April 30}\end{array}\right)\times \left(\begin{array}{l}\text{Cost per equivalent unit of}\\ \text{ Direct materials in April}\end{array}\right)\\ \text{=2,720}\times \$14\\ \text{=\$38,080}\end{array}$

(5)

Calculate the cost of conversion during the month end of April 30:

$\begin{array}{c}\begin{array}{l}\text{Cost of conversion}\\ \text{ during the month April 30}\end{array}\}\text{ = }\left(\begin{array}{l}\text{Units started in process for}\\ \text{the month end April 30}\end{array}\right)\times \left(\begin{array}{l}\text{Cost per equivalent unit of}\\ \text{ conversion in April}\end{array}\right)\\ \text{=680}\times \$11\\ \text{=\$7,480}\end{array}$

(6)

b. 1

To determine

Prepare a schedule showing units started and completed in the Finishing Department during April.

Explanation of Solution

Prepare a schedule showing units started and completed in the finishing Department during April.

Particulars	Units
Flow of physical units: Finishing Department
Units in beginning inventory, April 1	5,000
Units started in April	47,600
Units in process during April	52,600
Units in ending inventory, April 30	(2,000)
Units transferred to Finishing Department in April	50,600
Units in beginning inventory, April 1	(5,000)
Units started and completed in April	45,600

(Table 7)

Therefore, the units started and completed in the Finishing Department during April is 45,600

b. 2

To determine

Compute the equivalent units of direct materials and conversion for the Finishing Department in April.

Explanation of Solution

(Figure 4)

b. 3

To determine

Calculate the cost per equivalent unit of input resource for the Finishing Department during April.

Explanation of Solution

Calculate the cost per equivalent unit of input resource for the Finishing Department during April.

Particulars	Input Resources
	Molding materials  in $	Direct Materials  in $	Conversion in $
Cost per equivalent unit in April
Costs charged to Finishing Department in April (A)	1,190,000	496,000	147,600
Equivalent units in April (B)	47,600	49,600	49,200
Cost per equivalent unit in April (A÷B)	25	10	3

(Table 8)

Note:

Total cost of Molding Department $1,190,000 is transferred to the Finishing Department in April.

b.4

To determine

Prepare journal entry to record the units transferred from the Finishing Department to Finished goods inventory during April.

Explanation of Solution

Prepare journal entry to record the transfer of units from the Finishing Department to Finished goods inventory during April.

Date	Accounts title and explanation	Debit ($)	Credit ($)
	Finished goods inventory	1,922,800
	Work in process: Finishing Department  (9)		1,922,800
	(To record the transfer of 50,600 units to the Finishing goods in April)

(Table 9)

• Finished goods inventory is an asset and there is an increase in the value of an asset. Hence, debit the finished goods inventory by $1,922,800
• Work in process: Molding department is an asset and there is a decrease in the value of an asset. Hence, credit the work in process: molding department by $1,922,800.

Working Notes:

Calculate the cost of beginning inventory:

$\begin{array}{c}\text{Cost of beginning inventory =}\left[\begin{array}{l}\left(\begin{array}{l}\text{ Molding department }\\ \text{cost carried forward }\\ \text{during March 31}\end{array}\right)+\left(\begin{array}{l}\text{ Direct materials cost carried }\\ \text{forward from finishing }\\ \text{department during}\\ \text{ March 31}\end{array}\right)\\ +\left(\begin{array}{l}\text{Conversion cost carried }\\ \text{forward from finishing }\\ \text{department during }\\ \text{March 31}\end{array}\right)\end{array}\right]\\ \text{=\$125,000+\$15,000+\$6,000}\\ \text{=\$146,000}\end{array}$

(5)

Calculate the cost of molding department during the month April:

$\begin{array}{c}\begin{array}{l}\text{Cost of molding department}\\ \text{ during the month April}\end{array}\}\text{ = }\left(\text{Units started and completed}\right)\times \left(\begin{array}{l}\text{Cost per equivalent unit of}\\ \text{ molding department in April}\end{array}\right)\\ \text{=45,600}\times \$25\\ \text{=\$1,140,000}\end{array}$

(6)

Calculate the cost of direct materials during the month April for finishing department:

$\begin{array}{c}\begin{array}{l}\text{Cost of direct materials}\\ \text{ during the month April}\end{array}\}\text{ = }\left(\begin{array}{l}\text{Units finished in process }+\\ \text{Units started and completed}\end{array}\right)\times \left(\begin{array}{l}\text{Cost per equivalent unit of}\\ \text{ Direct materials in April}\end{array}\right)\\ \text{=}\left(\text{3,500+45,600}\right)\times \$10\\ \text{=49,100}\times \$10\\ =\$491,000\end{array}$

(7)

Calculate the cost of conversion during the month April for finishing department:

$\begin{array}{c}\begin{array}{l}\text{Cost of conversion}\\ \text{ during the month April}\end{array}\}\text{ = }\left(\begin{array}{l}\text{Units finished in process }+\\ \text{Units started and completed}\end{array}\right)\times \left(\begin{array}{l}\text{Cost per equivalent unit of}\\ \text{ conversion in April}\end{array}\right)\\ \text{=}\left(\text{3,000+45,600}\right)\times \$3\\ \text{=48,600}\times \$3\\ =\$145,800\end{array}$

(8)

Calculate the total cost of units transferred:

Particulars	Amount in $
Cost of beginning inventory, April 1 (5)	146,000
April molding materials (6)	1,140,000
April direct materials cost (7)	491,000
April conversion cost (8)	145,800
Total cost of units transferred	1,922,800

(Table 10)

(9)

a.5

To determine

Compute the costs assigned to ending inventory in the Finishing Department on April 30.

Explanation of Solution

Compute the costs assigned to ending inventory in the Finishing Department on April 30.

Particulars	Amount in $
Work in Process: Finishing department, April 30:
Molding materials (10)	50,000
Direct materials cost  (11)	5,000
Conversion cost  (12)	1,800
Ending inventory in process, April 30	56,800

(Table 11)

Working Notes:

Calculate the cost of molding materials during the month end of April 30 for finishing department:

$\begin{array}{c}\begin{array}{l}\text{Cost of Molding materials}\\ \text{ during the month April 30}\end{array}\}\text{ = }\left(\begin{array}{l}\text{Units started in process for}\\ \text{the month end April 30}\end{array}\right)\times \left(\begin{array}{l}\text{Cost per equivalent unit of}\\ \text{ Molding Department in April}\end{array}\right)\\ \text{=2,000}\times \$25\\ \text{=\$50,000}\end{array}$

(10)

Calculate the cost of direct materials during the month end of April 30 for finishing department:

$\begin{array}{c}\begin{array}{l}\text{Cost of direct materials}\\ \text{ during the month April 30}\end{array}\}\text{ = }\left(\begin{array}{l}\text{Units started in process for}\\ \text{the month end April 30}\end{array}\right)\times \left(\begin{array}{l}\text{Cost per equivalent unit of}\\ \text{ Direct materials in April}\end{array}\right)\\ \text{=500}\times \$10\\ \text{=\$5,000}\end{array}$

(11)

Calculate the cost of conversion during the month end of April 30 for finishing department:

$\begin{array}{c}\begin{array}{l}\text{Cost of conversion}\\ \text{ during the month April 30}\end{array}\}\text{ = }\left(\begin{array}{l}\text{Units started in process for}\\ \text{the month end April 30}\end{array}\right)\times \left(\begin{array}{l}\text{Cost per equivalent unit of}\\ \text{ conversion in April}\end{array}\right)\\ \text{=600}\times \$3\\ \text{=\$1,800}\end{array}$

(12)