Bergeron’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	3,900 sheets
Completed and transferred out to compression in January	2,700 sheets
Ending work-in-process inventory (25% of the way through the preparation process)	1,200 sheets
COSTS
Beginning work-in-process inventory	\(0
Costs added during January
Wood	3,120
Adhesive	1,836
Direct labor	990
Manufacturing overhead allocated	2,100
Total costs	\)8,046

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 unit 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

If a manufacturing company has various processes in the production process, that company needs to prepare a report known as a production cost report.

02

Equivalent unit of production for direct material

$$\begin{gathered} \mathbf{EUP}\mathbf{}\mathbf{for}\mathbf{}\mathbf{directmaterial}\mathbf{=}(\mathbf{Completed}\mathbf{}\mathbf{units}\mathbf{\times }\mathbf{Completion}\mathbf{\%})\mathbf{+}(\mathbf{EndingWIPunits}\mathbf{\times }\mathbf{Completion}\mathbf{\%}) \\ \begin{array}{c}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}(\mathbf{2}\mathbf{,}\mathbf{700}\mathbf{\times }\mathbf{100}\mathbf{\%})\mathbf{+}(\mathbf{1}\mathbf{,}\mathbf{200}\mathbf{\times }\mathbf{100}\mathbf{\%})\\ \mathbf{=}\mathbf{3}\mathbf{,}\mathbf{900}\\ \end{array} \end{gathered}$$

03

Equivalent unit of production for conversion costs

$$\begin{gathered} \mathbf{EUP}\mathbf{}\mathbf{for}\mathbf{}\mathbf{Conversion}\mathbf{}\mathbf{cost}\mathbf{=}(\mathbf{Completed}\mathbf{}\mathbf{units}\mathbf{\times }\mathbf{Completion}\mathbf{\%})\mathbf{+}(\mathbf{Ending}\mathbf{}\mathbf{WIP}\mathbf{}\mathbf{units}\mathbf{\times }\mathbf{Completion}\mathbf{\%}) \\ \mathbf{=}(\mathbf{2}\mathbf{,}\mathbf{700}\mathbf{\times }\mathbf{100}\mathbf{\%})\mathbf{+}(\mathbf{1}\mathbf{,}\mathbf{200}\mathbf{\times }\mathbf{25}\mathbf{\%}) \\ \mathbf{=}\mathbf{3}\mathbf{,}\mathbf{000} \end{gathered}$$

04

Journal entries

Date	Particulars	Debit ($)	Credit ($)
	WIP Inventory-Compression department	4,941
	WIP Inventory-Preparation department		4,941

05

T- account of Work-in-process inventory

Particulars	Amount ($)	Particulars	Amount ($)
Beginning WIP	0	WIP Inventory – Compression department	4,941
Wood	3,120
Direct labor	990
Manufacturing overhead allocated	2,100	Ending WIP	1,269

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