White’s Exteriors produces exterior siding for homes. The Preparation Department begins with wood, which is chopped into small bits. At the end of the process, an adhesive is added. Then the wood/adhesive mixture goes on to the Compression Department, where the wood is compressed into sheets. Conversion costs are added evenly throughout the preparation process. January data for the Preparation Department are as follows:
Units
Beginning Work-in-Process Inventory............ 0 sheets
Started in production...................3,500 sheets
Completed and transferred out to Compression in January.....2,500 sheets
Ending Work-in-Process Inventory
(35% of the way through the preparation process).........1,000 sheets
Costs
Beginning Work-in-Process Inventory............. $ 0
Costs added during January:
Wood............................ 2,905
Adhesives......................... 1,925
Direct labor......................... 665
Manufacturing overhead allocated................ 1,900
Total costs........................ $ 7,395
Requirements
1. Prepare a production cost report for the Preparation Department for January.
2. Prepare the journal entry to record the cost of the sheets completed and transferred out to the Compression Department.
3. Post the journal entries to the Work-in-Process Inventory—Preparation T-account. What is the ending balance?