Question

Lacy, Inc., produces a subassembly used in the production of hydraulic cylinders. The subassemblies are produced in three departments: rod cutting, plate cutting, and welding. Overhead is applied using the following drivers and activity rates:
Driver Rate Actual Usage (by plate cuting)

Direct Labor Cost 150% of direct labor $ 732,000

Inspection hours $40 per hour 7,450 hours

Purchase orders $1,000 per order 800 orders

Other data for the plate cutting department are as follows:

Beginning work in process

Units started 750,000
Direct material cost $6,000,000
Units, ending work in process
(100% materials; 64% conversion) 20,000

Required:
1. Prepare a physical flow schedule.
2. Calculate equivalent units of production for Direct materials and Conversion Costs using the weighted average method.
3. Calculate unit costs for Direct Materials, conversion costs, and total manufacturing

4. Provide the following information: The total cost of units transferred out, the journal entry for trasferring costs from plate cutting to welding, and the cost assigned to units in ending inventory.

Answer 1

Answer:(1)unit to be accounted for $730,000 (2) Equivalent unit of production Direct Materials $750,000, conversion cost $742,800 (3) unit cost for Direct materials $8, unit conversion cost $1.39 Total manufacturing cost $7,838,400 (4)unit accounted for $730,000, cost assigned to unit in ending inventory $12,800,journal entry Dr: work in process plate cutting $7,838,400, Cr: Work in process welding $7,838,400

Explanation:

(1) Physical flow schedule

Unit to be accounted for

Beginning work in process 750,000

---------------

Total unit accounted for. 750,000

Less: Ending inventory. 20,000

--------------

Unit accounted for transfer out. 730,000

(2)

Direct Materials. Conversion cost

Transfer out 730,000. 730,000

WIP(20,000 * 100%) 20,000

(20,000 * 64%) 12,800

-------------- -------------

750,000. 742,800

---------------- --------------------

(3) Unit cost of production

Unit Direct Materials Cost = Total material cost / Equivalent cost

= 6,000,000 / 750,000

= $8

Unit conversion cost = unit conversion cost / Equivalent unit of conversion cost

Unit conversion cost = Direct Labour + Cost of inspection

= 732,000 + 299,200

= 1,031,200 / 742,800

= 1.388

= $1.39

Total manufacturing cost

Direct Materials 6,000,000

Add:Purchases. 800,000

Add:Direct labour. 732,000

-----------------

Prime cost. 7,532,000

Add: Overhead. 299,200

Add: Beginning work in process 20,000

Less: Ending work in process. 12,800

---------------

Total manufacturing cost. 7,838,400

-----------------

(4) Unit accounted for transfer out = $730,000

Cost assigned to unit in ending inventory = $12,800

Journal entry

Dr: work in process plate cutting $7,838,400

Cr: Work in process welding $7,838,400