The Chatham Company makes a water-treatment chemical in a single processing depa
ID: 2483390 • Letter: T
Question
The Chatham Company makes a water-treatment chemical in a single processing department. Direct materials are added at the start of the process. Conversion are added evenly during the process. Chatham uses the weighted average - method of process costing. The following information for July 2005 is available. Ending Work in Process is 50% converted as to direct labor and overhead Beginning Raw Materials $ 4,000 Prepare a production Report I, II, and III, Calculate cost per unit for materials, labor and overhead. Prepare the journal entries for the costs used in work in process plus the cost transferred from work-in-process to finished goods. What is the balance in manufacturing overhead at July 31, 2005 before the account is closed out? What is the journal entry to account for the over or under-applied overhead? What is the total and individual component July 31, 2005 balances in work-in-process?Explanation / Answer
I Physical Flow of Units II Schedule of Equivalent units To account for Materials Labour OH Opening WIP 10000 units Started during July 40000 units 50000 units Accounted for Completed& transferred 34000 units 34000 34000 34000 Ending WIP 16000 Units 16000 8000 8000 50000 units 50000 42000 42000 III Cost Reconciliation & Cost per Equivalent Unit Total cost Direct Materials Labour OH Beginning WIP 130000 60000 50000 20000 Started into production 651000 280000 265000 106000 Total cost 781000 340000 315000 126000 Equivalent units as above 50000 42000 42000 Cost per Equivalent unit 6.8 7.5 3 Total cost 17.3 Cost Allocation Total Costs Materials Labour OH Completed &transferred 588200 231200 255000 102000 Ending WIP 192800 108800 60000 24000 Total 781000 340000 315000 126000 2 DEBIT CREDIT Work in Process 651000 Direct materials 280000 Direct Labour 265000 OH applied 106000 (To record cost of materials. Labour & OH applied for the month of July) Finished goods 588200 WIP 588200 (to record trf. To fin. Gds.) 34000 units@ $ 17.3 3. Manufacturing OH A/c Actual Incurred 100000 Applied during JULY(WIP) 106000 Bal Trf. To COGS 6000 106000 106000 Balance before closing 6000 Cr. 4. Mfg.. OH 6000 COGS 6000 (OH Over-applied Trf to COGS) 4. Ending WIP july 31 Total Costs Materials Labour OH Ending WIP 192800 108800 60000 24000