Pittsburgh Aluminum Company uses a process cost system to record the costs of manufacturing rolled aluminum, which requires a series of four processes. Materials are entered at the beginning of the Rolling process. The inventory of Work in Process— Rolling on June 1, 2010, and debits to the account during June were as follows:
Bal., 3,000 units, 1/4 completed:
Direct materials (3,000 A? $14.00)……………..$42,000
Conversion (3,000 A? 1/4 A? $8.30)………………..6,225
$48,225
From Smelting Department, 42,000 units…...$596,400
Direct labor……………………………………212,435
Factory overhead……………………………...156,040
During June, 3,000 units in process on June 1 were completed, and of the 42,000 units entering the department, all were completed except 4,500 units that were 4/5 completed. Charges to Work in Process—Rolling for July were as follows:
From Smelting Department, 45,000 units………………$652,500
Direct labor……………………………………………….219,900
Factory overhead…………………………………………160,800
During July, the units in process at the beginning of the month were completed, and of the 45,000 units entering the department, all were completed except 6,000 units that were 2/5 completed.
Instructions
1. Enter the balance as of June 1, 2010, in a four-column account for Work in Process— Rolling. Record the debits and the credits in the account for June. Construct a cost of production report and present computations for determining (a) equivalent units of production for materials and conversion, (b) costs per equivalent unit, (c) cost of goods finished, differentiating between units started in the prior period and units started and finished in June, and (d) work in process inventory.
2. Provide the same information for July by recording the July transactions in the four column work in process account. Construct a cost of production report, and present the July computations (a through d) listed in part (1).
3. Comment on the change in costs per equivalent unit for May through July for direct materials and conversion cost.