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Selzik Company makes super-premium cake mixes that go through two processing departments, Blending and Packaging. The following activity was recorded in the Blending Department during July:

Production data:

Units in process, July 1 (materials 100% complete; conversion 30% complete) 10,000
Units started into production 170,000
Units in process, July 31 (materials 100% complete; conversion 40% complete) 20,000
Cost data:
Work in process inventory, July 1:
Materials cost $8,500
Conversion cost $4,900
Cost added during the month:
Materials cost $139,400
Conversion cost $244,200

All materials are added at the beginning of work in the Blending Department. The company uses the FIFO method in its process costing system.

Required:
a. Determine the equivalent units for July for the Blending Department.
b. Compute the costs per equivalent unit for July for the Blending Department.
c. Determine the total cost of ending work in process inventory and the total cost of units transferred to the next process for the Blending Department in July.
d. Prepare a cost reconciliation report for the Blending Department for July.

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Answer:

a) EU for materials = 170,000

EU for conversion = 165,000

b) Materials = $0.82 per EU

Conversion = $1.48 per EU

c) Ending WIP = $28,240

Units transferred out = $368,760

d) cost reconciliation report:

Costs to be accounted for:

  • Beginning WIP $13,400
  • Cost added $383,600
  • Total costs to be accounted for $397,000

Cost accounted for as follows:  

  • Unit transferred out $368,760
  • Ending WIP $28,240
  • Total cost accounted for $397,000

Explanation:

beginning WIP 10,000

materials 100% complete (0% added during the period)

conversion 30% complete (70% added during the period) ⇒ 7,000 EU

units started 170,000

ending WIP 20,000

materials 100% complete ⇒ 20,000 EU

conversion 40% complete ⇒ 8,000 EU

units completed = 160,000

units started and completed = 150,000

beginning WIP costs:

Materials cost $8,500

Conversion cost $4,900

costs added during the period:

Materials cost $139,400

Conversion cost $244,200

Equivalent units for July:

EU for materials = 170,000

EU for conversion = 7,000 + 150,000 + 8,000 = 165,000

Costs per EU:

Materials = $139,400  / 170,000 = $0.82 per EU

Conversion = $244,200 / 165,000 = $1.48 per EU

Total costs:

Ending WIP = (20,000 x $0.82) + (8,000 x $1.48) = $28,240

Units transferred out = ($383,600 - $28,240) + $8,500 + $4,900 = $368,760

Costs to be accounted for:

  • Beginning WIP $13,400
  • Cost added $383,600
  • Total costs to be accounted for $397,000

Cost accounted for as follows:  

  • Unit transferred out $368,760
  • Ending WIP $28,240
  • Total cost accounted for $397,000

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