The Kim Corporation has three processing departments – department A, department B and department C. During March, the department B received 120,000 units from department A at a unit cost of $3.54. Out of these 120,000 units, 100,000 units were transferred to department C; 18,000 units were in process at the end of March (100% materials and 2/3 labor and manufacturing overhead); 2,000 units were lost in process (50% complete as to materials, labor and manufacturing overhead).
The cost added by department B during the the month of March was as follows:
- Materials: $83,300
- Labor: $203,400
- Factory overhead: $113,000
The entire loss occurred in department B is considered abnormal which is to be charged to factory overhead.
Required: Using the data given above, prepare a cost of production report of department B of Kim corporation.
Notice that the cost of abnormally lost 2,000 units has been charged to factory overhead.
Computation of equivalent units and unit cost
= 100,000 units + 18,000 units + (2,000 units) × 1/ 2
= 100,000 units + 18,000 units + 1,000 units
= 119,000 units
Labor and factory overhead:
= 100,000 units + (18,000 units) × 2/3 + (2,000 units) × 1/2
= 100,000 units + 12,000 units + 1,000 units
= 113,000 units
= $83,300/119,000 units
= $203,400/113,000 units