Bert’s Exteriors produces exterior siding for homes. The Preparation Department begins with wood, which is chopped into small bits. At the end of the process, an adhesive is added. Then the wood/adhesive mixture goes on to the Compression Department, where the wood is compressed into sheets. Conversion costs are added evenly throughout the preparation process. January data for the Preparation Department are as follows:

UNITS
Beginning work-in-process inventory	0 sheets
Started in production	3,800 sheets
Completed and transferred out to compression in January	2,900 sheets
Ending work-in-process inventory (30% of the way through the preparation process)	900 sheets
COSTS
Beginning work-in-process inventory	$0
Costs added during January
Wood	2,888
Adhesive	1,914
Direct labor	987
Manufacturing overhead allocated	2,500
Total costs	8,289

Requirements

1. Prepare a production cost report for the Preparation Department for January. The company uses the weighted-average method. (Hint: Each direct material added at a different point in the production process requires its own equivalent units of production computation.)

2. Prepare the journal entry to record the cost of the sheets completed and transferred out to the Compression Department.

3. Post the journal entries to the Work-in-Process Inventory—Preparation T-account. What is the ending balance?

Step by step solution

01

Step-by-Step Solution:Step 1: Production Cost Report

The comprehensive details about the costing of products are shown in the production costing report, and it is prepared by those companies that follow the process costing system.

02

Equivalent unit of production for direct material

$$\begin{gathered} \mathbf{EUP}\mathbf{}\mathbf{for}\mathbf{}\mathbf{directmaterial}\mathbf{=}(\mathbf{Completedunits}\mathbf{\times }\mathbf{Completion}\mathbf{\%})\mathbf{+}(\mathbf{EndingWIPunits}\mathbf{\times }\mathbf{Completion}\mathbf{\%}) \\ \mathbf{=}(\mathbf{2}\mathbf{,}\mathbf{900}\mathbf{\times }\mathbf{100}\mathbf{\%})\mathbf{+}(\mathbf{900}\mathbf{\times }\mathbf{100}\mathbf{\%}) \\ \mathbf{=}\mathbf{3}\mathbf{,}\mathbf{800} \end{gathered}$$

03

Equivalent unit of production for conversion costs

$$\begin{gathered} \mathbf{EUP}\mathbf{}\mathbf{for}\mathbf{}\mathbf{Conversion}\mathbf{}\mathbf{cost}\mathbf{=}(\mathbf{Completed}\mathbf{}\mathbf{units}\mathbf{\times }\mathbf{Completion}\mathbf{\%})\mathbf{+}(\mathbf{Ending}\mathbf{}\mathbf{WIPunits}\mathbf{\times }\mathbf{Completion}\mathbf{\%}) \\ \mathbf{=}(\mathbf{2}\mathbf{,}\mathbf{900}\mathbf{\times }\mathbf{100}\mathbf{\%})\mathbf{+}(\mathbf{900}\mathbf{\times }\mathbf{30}\mathbf{\%}) \\ \mathbf{=}\mathbf{3}\mathbf{,}\mathbf{170} \end{gathered}$$

04

Journal entries

Date	Particulars	Debit ($)	Credit ($)
	WIP Inventory-Compression department	5,394
	WIP Inventory-Preparation department		5,394

05

Work in process Account

Particulars	Amount ($)	Particulars	Amount ($)
Beginning WIP	0	WIP Inventory – Compression department	5,394
Wood	2,888
Direct labor	987
Manufacturing overhead allocated	2,500	Ending WIP	981

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