Chapter 18, Problem 8AP

a.1

To determine

Prepare a schedule showing units started and completed in the forging department during July.

Explanation of Solution

Prepare a schedule showing units started and completed in the forging department during July as follows:

Flow of Physical units: Forging Department
Particulars	Units
Beginning work in process inventory	5,000
Add: units started	75,000
Units in process	80,000
Less: Ending work in process invnetory	8,000
Units transferred to assembly department	72,000
Less: beginning work in process inventory	5,000
Units started and completed	67,000

Table (1)

2.

To determine

Compute the equivalent units of direct materials and conversion for the forging department during July.

Explanation of Solution

Prepare a schedule showing units started and completed in the forging department during July as follows:

Particulars	Direct materials	Conversion
Beginning work in process inventory	0	3,000
Units start and complete	67,000	67,000
Ending work in process inventory	8,000	6,000
Equivalent units of production	75,000	76,000

Table (2)

Working note:

Figure (1)

3.

To determine

Identify the cost per equivalent unit of input resource for the forging department during July.

Explanation of Solution

Identify the cost per equivalent unit of input resource for the forging department during July as follows:

Particulars	Direct materials	Conversion
Cost incurred by Forging department (A)	$675,000	$608,000
Equivalent units (B)	75,000	76,000
Cost per equivalent unit (A ÷ B)	$9	$8

Table (3)

4.

To determine

Prepare the journal entry to transfer units from Forging department to the assembly department during July.

Explanation of Solution

Prepare the journal entry to transfer units from Forging department to the assembly department during July as follows:

Account titles and Explanation	Debit	Credit
Work in process inventory - Assembly department	$1,224,000
Work in process inventory - Forging department		$1,224,000
(To record transfer of 72,000 units to the assembly department)

Table (4)

Working note:

Calculate total unit cost transferred.

Particulars	Amount
Beginning work in process inventory ($45,000 +$16,000)	$61,000
Add: Start and complete cost:
Materials (67,000 units × $9)	$603,000
Conversion (70,000 units × $8)	$560,000
Total cost of units transferred	$1,224,000

Table (5)

• Work in process inventory – Assembly department is a current asset, and it is increased. Therefore, debit work in process inventory account for $1,224,000.
• Work in process inventory – Forging department is a current asset, and it is decreased. Therefore, credit work in process inventory –Forging department account for $1,224,000.

5.

To determine

Compute cost assigned to ending inventory in the forging department on July 31.

Explanation of Solution

Compute cost assigned to ending inventory in the forging department on July 31 as follows:

$\begin{array}{c}\text{Ending work in process inventory = Direct materials + Conversion}\\ \text{=}\left(\text{8,000 units }\times \text{\$9}\right)+\left(\text{6,000}\text{units}\times \$\text{8}\right)\\ =\$72,000+\$48,000\\ =\$120,000\end{array}$

b.1

To determine

Prepare a schedule showing units started and completed in the assembly department during July.

Explanation of Solution

Flow of Physical units: Assembly Department
Particulars	Units
Beginning work in process inventory	4,000
Add: units started	72,000
Units in process	76,000
Less: Ending work in process inventory	16,000
Units transferred to assembly department	60,000
Less: beginning work in process inventory	4,000
Units started and completed	56,000

Table (6)

2.

To determine

Compute equivalent units of direct materials and conversion for the assembly department in July.

Explanation of Solution

Compute equivalent units of direct materials and conversion for the assembly department in July as follows:

Particulars	Direct materials	Conversion
Beginning work in process inventory	4,000	3,000
Units start and complete	56,000	56,000
Ending work in process inventory	-	4,800
Equivalent units of production	60,000	63,800

Table (7)

Working note:

Figure (2)

3.

To determine

Compute equivalent cost per unit of input resource for the assembly department during July.

Explanation of Solution

Compute equivalent cost per unit of input resource for the assembly department during July as follows:

Particulars	Direct materials	Conversion
Cost incurred by  department (A)	$720,000	$191,400
Equivalent units (B)	60,000	63,800
Cost per equivalent unit (A ÷ B)	$12	$3

Table (8)

4.

To determine

Prepare journal entry to record transfer units from the assembly department to finished goods inventory during July.

Explanation of Solution

Prepare journal entry to record transfer units from the assembly department to finished goods inventory during July as follows:

Account titles and Explanation	Debit	Credit
Work in process inventory - Assembly department	$1,920,000
Work in process inventory - Forging department		$1,920,000
(To record transfer of 72,000 units to the assembly department)

Table (9)

Working note:

Calculate total unit cost transferred.

Particulars	Amount
Beginning work in process inventory ($68,000 +$3,000)	$71,000
Add: Start and complete cost:
Materials (60,000 units × $12)	$720,000
July forging materials (56,000 units × $17)	$952,000
Conversion (59,000 units × $3)	$117,000
Total cost of units transferred	$1,920,000

Table (10)

• Finished goods inventory is a current asset, and it is increased. Therefore, debit finished goods inventory account for $1,920,000.
• Work in process inventory – Assembly department is a current asset, and it is decreased. Therefore, credit work in process inventory –Assembly department account for $1,920,000.

5.

To determine

Compute the cost assigned to ending inventory in the assembly department.

Explanation of Solution

Compute cost assigned to ending inventory in the forging department on July 31 as follows:

$\begin{array}{c}\text{Ending work in process inventory = Direct materials (forging) + Conversion}\\ \text{=}\left(\text{16,000 units }\times \text{\$7}\right)+\left(\text{4,800}\text{units}\times \$3\right)\\ =\$272,000+\$14,400\\ =\$286,400\end{array}$