Question

Problem 4-36 Operation Costing; Unit Costs; Journal Entries (LO 4-7)

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Plasto Corporation manufactures a variety of plastic products, including a series of molded chairs. The three models of molded chairs, which are all variations of the same design, are Standard (can be stacked), Deluxe (with arms), and Executive (with arms and padding). The company uses batch manufacturing and has an operation-costing system. The production process includes an extrusion operation and subsequent operations to form, trim, and finish the chairs. Plastic sheets are produced by the extrusion operation, some of which are sold directly to other manufacturers. During the forming operation, the remaining plastic sheets are molded into chair seats and the legs are added; the Standard model is sold after this operation. During the trim operation, the arms are added to the Deluxe and Executive models and the chair edges are smoothed. Only the Executive model enters the finish operation where the padding is added. All of the units produced receive the same steps within each operation. The May production run had a total manufacturing cost of $1,006,180. The units of production and direct-material costs incurred were as follows:

Units Produced		Extrusion Materials			Form Materials			Trim Materials			Finish Materials
Plastic sheets	5,400		$	70,200
Standard model	6,400			83,200		$	32,000
Deluxe model	3,300			42,900			16,500		$	13,200
Executive model	1,700			22,100			8,500			6,800		$	11,900
Total	16,800		$	218,400		$	57,000		$	20,000		$	11,900

   

Manufacturing costs applied during the month of May were as follows:

   

	Extrusion Operation				Form Operation				Trim Operation				Finish Operation
Direct labor		$	144,480			$	62,000			$	27,500			$	15,300
Manufacturing overhead			285,600				97,600				46,000				20,400
: 1. For each product produced by Plasto Corporation during the month of May, determine the (a) unit cost and (b) total cost. Be sure to account for all costs incurred during the month. (Round "Unit costs" to 2 decimal places.) 2. Prepare journal entries to record the flow of production costs during May. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

Requirement 1: Determine the unit cost and total cost as follows

Unit costs	Plastic	Standard	Deluxe	Executive
Material cost:
Extrusion material	$13.00	$13.00	$13.00	$13.00
Form material		$5.00	$5.00	$5.00
Trim material			$4.00	$4.00
Finish material				$7.00
Conversion costs:
Extrusion material	$25.60	$25.60	$25.60	$25.60
Form material		$14.00	$14.00	$14.00
Trim material			$14.70	$14.70
Finish material				$21.00
Total unit costs	$38.60	$57.60	$76.30	$104.30
×   Number of units produced	5,400	6,400	3,300	1,700
Total product cost	$208,440	$368,640	$251,790	$177,310

Notes:

Particulars	Materials
	Extrusion	Form	Trim	Finish
Unit material cost
Plastic sheets	5,400
Standard model	6,400	6,400
Deluxe model	3,300	3,300	3,300
Executive model	1,700	1,700	1,700	1,700
Total untis produced (a)	16,800	11,400	5,000	1,700
Total direct material cost (b)	$218,400	$57,000	$20,000	$11,900
Unit material cost (b) ÷ (a)	$13.00	$5.00	$4.00	$7.00
Unit conversion cost
Direct labor cost	$144,480	$62,000	$27,500	$15,300
Manufacturing overhead	$285,600	$97,600	$46,000	$20,400
Total conversion costs (c)	$430,080	$159,600	$73,500	$35,700
Unit conversion cost (c) ÷ (a)	$25.60	$14.00	$14.70	$21.00

Total costs accounted for:

Particulars	Amount
Plastic sheets	$208,440
Standard model	$368,640
Deluxe model	$251,790
Executive model	$177,310
Total costs	$1,006,180

Requirement 2: Prepare the following journal entries

Date	Account Title and Explanation	Debit	Credit
	Work in process inventory - Extrusion	$648,480
	Raw material inventory		$218,400
	Conversion costs applied		$430,080
	To allocate costs
	Finished goods inventory	$208,440
	Work in process inventory - Extrusion		$208,440
	To record the transfer of finished items from work in process
	Work in process inventory - Forming	$656,640
	Work in process inventory - Extrusion (648,480 − 208,440)		$440,040
	Raw material inventory		$57,000
	Conversion costs applied		$159,600
	To allocate costs
	Finished goods inventory	$368,640
	Work in process inventory - Forming		$368,640
	To record the transfer of finished items from work in process
	Work in process inventory - Trimming	$381,500
	Work in process inventory - Forming (656,640 − 368,640)		$288,000
	Raw material inventory		$20,000
	Conversion costs applied		$73,500
	To allocate costs
	Finished goods inventory	$251,790
	Work in process inventory - Trimming		$251,790
	To record the transfer of finished items from work in process
	Work in process inventory - Finishing	$177,310
	Work in process inventory - Trimming (381,500 − 251,790)		$129,710
	Raw material inventory		$11,900
	Conversion costs applied		$35,700
	To allocate costs
	Finished goods inventory	$177,310
	Work in process inventory - Finishing		$177,310
	To record the transfer of finished items from work in process