Fen Furnishings produces brass handles for the furniture industry in a four-stage process –Mixing, Moulding,
Polishing and Packaging. Costs incurred in the Polishing Department during January are summarized as follows:
WIP – Polishing Process A/C
January 1 Bal.
Transfer from Moulding
Direct Materials Added
Direct Labour
Manufacturing Overhead
20,000
$ 0
1,310,000
391,600
638,000
307,400
Normal losses are estimated to be 2½% of input during the period. Inspection takes place during the processing
operation, at which point damaged handles are separated from good handles and sold as scrap to local furniture
manufacturers at $85 each.
At inspection, 2,000 handles were rejected as scrap. These units had reached the following degree of completion:
Transfer from Moulding 100%
Direct material added 40%
Conversion costs 20%
Work-in-progress at the end of January was 4,000 handles and had reached the following degree of completion:
Transfer from Moulding 100%
Direct material added 80%
Conversion costs 50%
Direct materials added and conversion costs are incurred uniformly throughout the process.
Required:
(a) Compute the equivalent units and cost per equivalent units for direct materials (From Moulding &
Direct materials added) and conversion costs.
(b) Compute the:
cost of the unexpected losses
total cost of the handles completed and transferred out of the Packaging Department
cost of ending work in process inventory in the Polishing Department
(c) Complete the Work in Process Inventory – Polishing Process T-account, clearly showing the ending balance.
(d) Prepare the journal entries for the:
assignment of direct materials, direct labour incurred and the manufacturing overhead applied to the Polishing Process
cost of the units completed and transferred out to the Packaging Process
(e) Given that 30% of the unexpected losses were as a result of pilferage, calculate Fen Furnishings true loss associated with the Polishing Process
