Question

Roan Paper Co. produces the paper used by wallpaper manufacturers.

Roan's four-stage process includes mixing, cooking, rolling and cutting.
On March 1, the Mixing Department had 300 rolls of paper in process.
During March, the Mixing Department completed the mixing process for those 300 rolls and also started and completed the mixing process for an additional 4,200 rolls of paper.
The department started but did not finish the mixing process for an additional 500 rolls, which were 20% complete with respect to both direct materials and conversion work at the end of March.
Direct materials and conversion costs are incurred evenly throughout the mixing process.
The Mixing Department compiled the following data for March:
Direct Materials Direct Labor Manufacturing Overhead Allocated Total Costs
Beginnning
inventory, Mar. 1 $350 $245 $200 $795
Costs added
during March 4,940 3,000 3,225 11,165
Total costs $5,290 $3,245 $3,425 $11,960
Required:
1. Prepare a production cost report for the Mixing Department for March.
The company uses the weighted-average method.
2. Journalize all transactions affecting the company's mixing process during March.
Assume labor costs are accrued and not yet paid.

Answer 1

Roan Paper Co.

Mixing Department

Production Cost Report for March:

Direct Direct Manufacturing Total Costs

Materials Labor O/h Allocated

Beginning inventory $350 $245 $200 $795

Costs added during

March 4,940 3,000 3,225 11,165

Total costs $5,290 $3,245 $3,425 $11,960

less Ending inventory $115 $71 $74 $260

Cost of production $5,175 $3,174 $3,351 $11,700

2. General Journal:

Date Description Debit Credit

March

Cost of production $11,700

Direct Materials $5,175

Direct Labor $3,174

Manufacturing overhead $3,351

To record the cost of production for march.

Direct Materials costs $5,175

Direct Labor costs $3,174

Manufacturing overhead $3,351

Cash Account $8,526

Wages Payable $3,174

To record costs of materials, labor and overhead.

Step-by-step explanation:

a) Data and Calculations for March:

Direct Direct Manufacturing Total Costs

Materials Labor O/h Allocated

Beginning inventory $350 $245 $200 $795

Costs added during

March 4,940 3,000 3,225 11,165

Total costs $5,290 $3,245 $3,425 $11,960

Total units = 5,000 ( Beginning = 300, March started = 4,200 and Ending = 500 units)

Beginning inventory of 300 and started and completed, 4,200 were 100% complete = 4,500

Ending inventory of 500 were 20% complete = 100 units.

b) Calculation of Equivalent units:

Direct Direct Manufacturing Total Costs

Materials Labor O/h Allocated

Units completed 4,600 4,600 4,600 4,600

Ending inventory 100 100 100 100

Production for March 4,500 4,500 4,500 4,500

Unit cost per

equivalent unit $1.15 $0.71 $0.74 $2.60

Cost of Ending WIP $115 $71 $74 $260

Cost of production $5,175 $3,174 $3,351 $11,700

b) Equivalent units are the units under production multiplied by their percentage of completion. Usually, completed units have 100% completion, while work in process do not have 100% completion with respect to conversion costs, especially. The purpose of calculating equivalent units is to determine accurate costs of units completed.

c) The weighted-average method in allocating production costs means that the beginning inventory, units started and completed in the period, and the equivalent units of ending inventory are added. Then the costs of materials, labor, and overhead are allocated based on the average costs.