Cost of production and journal entries Instructions Chart of Accounts Journal Fi
ID: 2405773 • Letter: C
Question
Cost of production and journal entries Instructions Chart of Accounts Journal Final Questions Instructions AccuBlade Castings Inc. casts blades for turbine engines. Within the Casting Department, alloy is first melted in a crucible, then poured into molds to produce the castings. On May 1, there were 240 pounds of alloy in process, which were 60% complete as to conversion. The Work in Process balance for these 240 pounds was $33,792, determined as follows: $31,200 2592 $33,792 Direct materials (240 x $130) Conversion (240 x 60% x $18) During May, the Casting Department was charged $378,000 for 2,800 pounds of alloy and $21,808 for direct labor. Factory overhead is applied to the department at a rate of 150% of direct labor. The department transferred out 2,840 pounds of finished castings to the Machining Department. The May 31 nventory in process was 15% complete as to conversion. Required a. 1. On May 1, prepare the journal entry for the Casting Department for the materials charged to production." 2. On May 31, prepare the journal entry for the Casting Department for the conversion costs charged to production 3. On May 31, prepare the journal entry for the Casting Department for the completed production transferred to the Machining Department.Explanation / Answer
Work in Process—Casting Department
378,000
Materials—Alloy
378,000
a. 1.
Work in Process—Casting Department
54,520
Wages Payable
21,808
Factory Overhead*
32,712
2.
* $21,808 × 150%
Work in Process—Machining Department*
438,712
Work in Process—Casting Department
438,712
3.
* Supporting calculations:
Cost of 2,840 transferred-out pounds:
Inventory in process, May 1…………………………………………………………… $ 33,792
Cost to complete May 1 inventory:
96 pounds × $20/lb. (see calculations below)……………………………………… 1,920
Pounds started and completed in May
[2,600 lbs. × ($135 + $20)]…………………………………………………………… 403,000
Transferred to Machining Department……………………………………………… $438,712
Supporting equivalent unit and cost per equivalent unit calculations:
Whole Units
Equivalent Units
Materials
Conversion
Inventory in process, May 1
(60% completed)
240
0
961
Started and completed in May
2,6002
2,600
2,600
Transferred to Machining Department
in May
2,840
2,600
2,696
Inventory in process, May 31
(15% completed)
2003
200
304
Total
3,040
2,800
2,726
1 240 units × (1 – 60%)
2 2,840 units – 240 units
3 240 units + 2,800 units – 2,840 units
4 200 units × 15%
Cost per equivalent unit of materials: Cost per equivalent unit of conversion:
$378,000
2,800
$54,520
2,726
= $135 per pound
= $20 per pound
b. $27,600; determined as follows:
Direct materials (200 × $135)……………………………… $27,000
Conversion (200 × 15% × $20)…………………………… 600
$27,600
c.
Materials:
From current period................................................... $135
From beginning inventory......................................... 130
Increase................................................................ ....... $ 5
Conversion:
From current period................................................... $ 20
From beginning inventory......................................... 18
Increase....................................................................... $ 2
The cost per equivalent unit of materials increased by $5 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.
Work in Process—Casting Department
378,000
Materials—Alloy
378,000