Complete A Production Cost Report For The Motor Department

Complete a production cost report for the Motor Department of Sun Appliance for March

One of Sun Appliance's products is a dishwasher. Two processing departments are involved in the dishwasher's manufacture. The tub is assembled in one department, and a second department assembles and installs the motor. There is no beginning or ending work in process in either department. During March, the company incurred the following costs in the manufacture of 4,000 dishwashers.

Costs incurred in the Motor Department include: Direct materials $96,000, direct labor $18,000, manufacturing overhead $6,000.

The task is to prepare a production cost report for the Motor Department of Sun Appliance for March, including sections on physical flow, equivalent units, cost per equivalent unit, and total cost assignment. Costs per equivalent unit should be rounded to two decimal places. All cells must be filled, with "0" entered where applicable, and no "$" signs used.

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Introduction

The production cost report is an essential managerial accounting tool that provides detailed analysis of production costs by departments, with particular focus on cost accumulation, equivalent unit calculations, and cost allocations. In this context, we analyze the Motor Department's costs for March, involving a process where no beginning or ending WIP exists, simplifying the flow of units and costs. The report covers physical units flow, equivalent units calculation, cost per unit, and total costs assigned, helping management in decision-making and cost control.

Part I: Physical Flow

In the Motor Department, the physical flow begins with units started into production during the period, which are 4,000 dishwashers. Since there is no beginning or ending WIP, and all units started are completed within the period, the units accounted for are straightforward. Specifically, the units started and completed amount to 4,000 units, with no units remaining in WIP at period end. Therefore, the physical flow is as follows:

• Units started into production: 4,000
• Units completed and transferred out: 4,000
• Ending WIP: 0

Part II: Equivalent Units

Since there is no beginning or ending WIP, the calculation of equivalent units is straightforward. All units started are completed and transferred out, so both the direct materials and conversion costs are fully assigned to these units, assuming 100% completion for simplicity:

Part III: Cost per Equivalent Unit

Next, determine the total costs from the previous department (cost transferred in) and the costs incurred in the Motor Department during March. The costs from the Tub Department transferred to Motor are given as $150,000 for direct materials, which are transferred in. The Motor Department's costs include direct materials ($96,000), direct labor ($18,000), and manufacturing overhead ($6,000).

For simplicity, assume the transferred-in costs are fully assigned, and the total costs for February are zero (no beginning WIP). The total costs are therefore:

• Costs from the Tub Department (transferred-in): $150,000
• Costs incurred in Motor Department: Direct materials $96,000, direct labor $18,000, manufacturing overhead $6,000

Total costs to be assigned = $150,000 + $96,000 + $18,000 + $6,000 = $270,000

The cost per equivalent unit for direct materials and conversion costs (labor + overhead) is calculated as:

• Cost per equivalent unit for direct materials = Total direct materials costs / Equivalent units of direct materials
• Cost per equivalent unit for conversion costs = Total conversion costs / Equivalent units of conversion

Since costs from the Tub Department are part of direct materials transferred, the costs from the Tub Department ($150,000) are allocated to the units. The Motor Department costs are allocated to direct materials ($96,000) and conversion (labor + overhead: $18,000 + $6,000 = $24,000), totaling $120,000.

Calculations:

• Equivalent units for direct materials: 4,000
• Equivalent units for conversion: 4,000
• Total direct materials costs (from department): $96,000
• Total conversion costs: $24,000

Cost per equivalent unit:

Direct Materials: $96,000 / 4,000 = 24.00
Conversion Costs: $24,000 / 4,000 = 6.00

Part IV: Total Cost Assignment

The total costs assigned to completed units and ending WIP are based on the equivalent units and cost per unit:

• Cost of goods transferred out (4,000 units):

Direct materials: 4,000 x 24.00 = 96,000

Conversion costs: 4,000 x 6.00 = 24,000

Total transferred costs: 96,000 + 24,000 = 120,000

Since there is no ending WIP, all costs are associated with units transferred out. The total costs to account for are the sum of costs from previous department plus current period costs, amounting to $270,000, matching the costs transferred out:

Conclusion

The production cost report indicates that the Motor Department incurred total costs of $120,000 for the 4,000 dishwashers completed in March. The cost per unit was $24.00 for direct materials and $6.00 for conversion costs. These calculations are fundamental for inventory valuation and cost control, providing clear insights into the manufacturing expenses involved in the dishwasher production process.

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