Direct materials costs in beginning inventory, February 1 . . . . . . . . . . $12,000 — Newton Corporation uses process costing system trace through several phases production

Newton Corporation uses a process costing system to trace costs through several phases of production, starting with the Blending Department and ending with the Packaging Department. Recent computer problems have caused some of the company’s accounting records to be destroyed. Shown below is a partial summary of information retrieved by accountants from the Blending Department’s February production cost report:

Cost Data: Blending Department

Direct materials costs in beginning inventory, February 1 . . . . . . . . . . $12,000

Conversion costs in beginning inventory, February 1. . . . . . . . . . . . . . 25,200

Direct materials costs incurred in February . . . . . . . . . . . . . . . . . . . . . 162,000

Conversion costs incurred in February . . . . . . . . . . . . . . . . . . . . . . . . . 271,000

Cost per equivalent unit of conversion in February. . . . . . . . . . . . . . . . 5

Physical Units: Blending Department

Units in process, February1.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ?

Units transferred out during February.... . . . . . . . . . . . . . . . . . . . . . . . 58,000

Units started in February . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54,000

Units in process, February 28 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000

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Percentage of Completion: Blending Department

Direct materials, February 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%

Conversion, February 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ?

Direct materials, February 28 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%

Conversion, February 28 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

a. Compute the number of units that were in the Blending Department’s beginning inventory on February 1.

b. Compute the number of units that were started and completed by the Blending Department in February.

c. Compute the cost per equivalent unit of direct materials and conversion carried forward from January and assigned to the Blending Department’s beginning inventory on February 1.

d. Compute the Blending Department’s cost per equivalent unit of direct materials consumed in February.

SOLUTION

a.	Units transferred out of the Blending Department in February	58,000
	Add: Units in process on February 28	2,000
	Total units in process during February	60,000
	Less: Units started in February	(54,000)
	Units in process on February 1	6,000

b.	Units transferred out of the Blending Department in February	Units transferred out of the Blending Department in February	Units transferred out of the Blending Department in February	Units transferred out of the Blending Department in February	58,000
	Less: Units in process on February 1 (see part a)	Less: Units in process on February 1 (see part a)	Less: Units in process on February 1 (see part a)	Less: Units in process on February 1 (see part a)	(6,000)
	Units started and completed in February	Units started and completed in February	Units started and completed in February	Units started and completed in February	52,000
c.	Direct material costs in beginning inventory, February 1	Direct material costs in beginning inventory, February 1	Direct material costs in beginning inventory, February 1	Direct material costs in beginning inventory, February 1	$ 12,000
	Units of inventory on February 1 (materials 100% complete)	Units of inventory on February 1 (materials 100% complete)	Units of inventory on February 1 (materials 100% complete)	Units of inventory on February 1 (materials 100% complete)	÷ 6,000
	Cost per equivalent unit of direct material from January	Cost per equivalent unit of direct material from January	Cost per equivalent unit of direct material from January	Cost per equivalent unit of direct material from January	$ 2
	Cost per equivalent unit of conversion from January*	Cost per equivalent unit of conversion from January*	Cost per equivalent unit of conversion from January*	Cost per equivalent unit of conversion from January*	$ 6
	*Computations:	*Computations:	*Computations:	*Computations:
	Conversion costs incurred in February	Conversion costs incurred in February	Conversion costs incurred in February	Conversion costs incurred in February	$ 271,000
	Cost per equivalent unit of conversion in February	Cost per equivalent unit of conversion in February	Cost per equivalent unit of conversion in February	Cost per equivalent unit of conversion in February	÷ 5
	Equivalent units of conversion in February	Equivalent units of conversion in February	Equivalent units of conversion in February	Equivalent units of conversion in February	54,200
	Less: Units of conversion used in February to	Less: Units of conversion used in February to	Less: Units of conversion used in February to	Less: Units of conversion used in February to
		Start and complete 52,000 units (see part b)	Start and complete 52,000 units (see part b)	Start and complete 52,000 units (see part b)	(52,000)
		Start inventory in process on February 28 (2,000 units × 20%)	Start inventory in process on February 28 (2,000 units × 20%)	Start inventory in process on February 28 (2,000 units × 20%)	(400)
	Equivalent units required to complete inventory on February 1	Equivalent units required to complete inventory on February 1	Equivalent units required to complete inventory on February 1	Equivalent units required to complete inventory on February 1	1,800
	Units in inventory on February 1	Units in inventory on February 1	Units in inventory on February 1	Units in inventory on February 1	÷ 6,000
	Percentage required to complete February 1 inventory	Percentage required to complete February 1 inventory	Percentage required to complete February 1 inventory	Percentage required to complete February 1 inventory	30%
	Percentage of completion of February 1 inventory (100% – 30%)	Percentage of completion of February 1 inventory (100% – 30%)	Percentage of completion of February 1 inventory (100% – 30%)	Percentage of completion of February 1 inventory (100% – 30%)	70%
	Equivalent units of conversion carried forward from January:	Equivalent units of conversion carried forward from January:	Equivalent units of conversion carried forward from January:	Equivalent units of conversion carried forward from January:
		6,000 units in process × 70% complete	6,000 units in process × 70% complete	6,000 units in process × 70% complete	4,200
	Conversion costs carried forward from January	Conversion costs carried forward from January	Conversion costs carried forward from January	Conversion costs carried forward from January	$ 25,200
	Equivalent units of conversion carried forward from January	Equivalent units of conversion carried forward from January	Equivalent units of conversion carried forward from January	Equivalent units of conversion carried forward from January	÷ 4,200
	Cost per equivalent unit of conversion from January	Cost per equivalent unit of conversion from January	Cost per equivalent unit of conversion from January	Cost per equivalent unit of conversion from January	$ 6

February cost per equivalent unit of direct material*	February cost per equivalent unit of direct material*	February cost per equivalent unit of direct material*		$ 3
*Computations:	*Computations:
Step 1: Compute equivalent units of direct material	Step 1: Compute equivalent units of direct material	Step 1: Compute equivalent units of direct material	Step 1: Compute equivalent units of direct material
To finish beginning inventory on February	To finish beginning inventory on February	To finish beginning inventory on February	To finish beginning inventory on February
	6,000 units 100% complete (see part a)	6,000 units 100% complete (see part a)	6,000 units 100% complete (see part a)	0
To start and complete 52,000 units in February (see part b)	To start and complete 52,000 units in February (see part b)	To start and complete 52,000 units in February (see part b)	To start and complete 52,000 units in February (see part b)	52,000
To start 2,000 units in ending inventory (100% complete)	To start 2,000 units in ending inventory (100% complete)	To start 2,000 units in ending inventory (100% complete)	To start 2,000 units in ending inventory (100% complete)	2,000
Equivalent units of direct material in February	Equivalent units of direct material in February	Equivalent units of direct material in February	Equivalent units of direct material in February	54,000
Step 2: Compute cost per equivalent unit	Step 2: Compute cost per equivalent unit	Step 2: Compute cost per equivalent unit	Step 2: Compute cost per equivalent unit
Direct material costs incurred in February	Direct material costs incurred in February	Direct material costs incurred in February	Direct material costs incurred in February	$ 162,000
Equivalent units of direct material in February	Equivalent units of direct material in February	Equivalent units of direct material in February	Equivalent units of direct material in February	÷ 54,000
Cost per equivalent unit of direct material in February	Cost per equivalent unit of direct material in February	Cost per equivalent unit of direct material in February	Cost per equivalent unit of direct material in February	$ 3