Chen Company manufactures basketballs. Materials are added at the beginning of the production process and conversion costs are incurred uniformly. Production and cost data for the month of July 2010 are as follows.
Production Data-Basketballs Units Percent
Complete
Work in process units, July 1 590 60%
Units started into production 1,060
Work in process units, July 31 750 40%
Cost Data - Basketballs
Work in process, July 1
Materials $757
Conversion costs 548
$1,305
Direct materials 2,873
Direct labor 1,727
Manufacturing overhead 1,325
Calculate the following. (Round cost per unit to 2 decimal places, e.g. 10.50. Round other answers to 0 decimal places, e.g. 125.)
The equivalent units of production for materials and conversion.
Materials
Conversion costs
The unit costs of production for materials and conversion costs.
Unit cost-Materials $
Unit cost-Conversion costs $
The assignment of costs to units transferred out and in process at the end of the period.
Costs accounted for
Transferred out $
Work in process, July 31
Materials $
Conversion costs
Total costs $
Complete the production cost report for the month of July for the basketballs.
CHEN COMPANY
Basketball Department
Production Cost Report
For the Month Ended July 31, 2010
Equivalent Units
Quantities
Physical Units
Materials
Conversion Costs
Units to be accounted for
Work in process, July 1
Started into production
Total units
Units accounted for
Transferred out
Work in process, July 31
Total units
Costs
Materials
Conversion Costs
Total
Unit costs
Costs in July $
$
$
Equivalent units
Unit costs $
$
Cost to be accounted for
Work in process, July 1 $
Started into production
Total costs $
Cost Reconciliation Schedule
Costs accounted for
Transferred out $
Work in process, July 31
Materials $
Conversion costs
Total costs
To calculate the equivalent units of production for materials and conversion costs, you need to consider the percentage of completion for each category.
For materials:
- Work in process units, July 1: 590 units (60% complete) = 590 * 0.60 = 354 units
- Units started into production: 1,060 units (100% complete) = 1,060 * 1.00 = 1,060 units
- Work in process units, July 31: 750 units (40% complete) = 750 * 0.40 = 300 units
Therefore, the equivalent units of production for materials = 354 units + 1,060 units + 300 units = 1,714 units.
For conversion costs:
- Work in process units, July 1: 590 units (60% complete) = 590 * 0.60 = 354 units
- Units started into production: 1,060 units (100% complete) = 1,060 * 1.00 = 1,060 units
- Work in process units, July 31: 750 units (40% complete) = 750 * 0.40 = 300 units
Therefore, the equivalent units of production for conversion costs = 354 units + 1,060 units + 300 units = 1,714 units.
Next, to calculate the unit costs of production for materials and conversion costs, divide the total costs for each category by the equivalent units calculated above.
Unit cost for materials = Total materials cost / Equivalent units of production for materials
= $2,873 / 1,714 units
≈ $1.68
Unit cost for conversion costs = Total conversion costs / Equivalent units of production for conversion costs
= $1,727 + $1,325 / 1,714 units
≈ $1.90
To assign costs to units transferred out and in process at the end of the period, multiply the unit costs calculated above with the respective equivalent units.
Costs accounted for:
- Transferred out = Unit cost for materials * Total units transferred out + Unit cost for conversion costs * Total units transferred out
= $1.68 * Total units transferred out + $1.90 * Total units transferred out
- Work in process, July 31:
- Materials = Unit cost for materials * Equivalent units of production for materials in work in process, July 31
= $1.68 * 300 units
- Conversion costs = Unit cost for conversion costs * Equivalent units of production for conversion costs in work in process, July 31
= $1.90 * 300 units
Total costs = Costs accounted for (transferred out + work in process, July 31)
The production cost report can now be completed using the above calculations.