Cost of production and journal entries Instructions Chart of

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.

Solution

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