Question

1. Hudson Dock Company manufactures boat docks on an assembly line. Its standard costing system uses two costs categories, direct materials and conversion costs. Each tractor must pass through the Assembly Department and the Finishing Department. Direct materials are added at the beginning of the production process. Conversion costs are allocated evenly throughout production.

Data for the Assembly Department for May 20X5 are:
Work in process, beginning inventory	70 units
Direct materials (100% complete)
Conversion costs (25% complete)
Units started during May	40 units
Work in process, ending inventory	10 units
Direct materials (100% complete)
Conversion costs (50% complete)
Costs for May
Standard costs for Assembly:
Direct materials	$4,000 per unit
Conversion costs	$16,000 per unit
Work in process beginning inventory:
Direct materials	$140,000
Conversion costs	$260,000

Which of the following journal entries properly records the Assembly Department’s actual conversion costs for the month, assuming that conversion costs are 20% higher than expected?

1. Materials Inventory                                                          1,680,000

          Work-in-Process – Assembly Department                              1,680,000

2. Assembly Department Conversion Cost Control             1,680,000

          Various accounts                                                                      1,680,000

3. Assembly Department Conversion Cost Control             1,400,000

         Materials Inventory                                                                  1,400,000

4. Materials Inventory                                                           1,680,000

          Assembly Department Conversion Cost Control                     1,680,000

5. None of the above

Answer 1

Assembly Department Conversion Cost Control	1680000
Various accounts		1680000
Option B is correct
Workings:
To complete Work in process, beginning	840000	=70*(1-25%)*16000
Units started and completed	480000	=(40-10)*16000
Work in process, ending	80000	=10*50%*16000
Budgeted conversion costs	1400000
Actual conversion costs	1680000	=1400000*1.20