Fen Furnishings produces brass handles for the furniture industry in a four-stage process –Mixing, Moulding, polishing and packaging. Costs incurred in the Polishing Department during January are...

Fen Furnishings produces brass handles for the furniture industry in a four-stage process –Mixing, Moulding, polishing and packaging.
Costs incurred in the Polishing Department during January are summarized as follows:

WIP - Polishing Process A/C

January 1 Bal.                                       0
Transfer from Moulding   20000          1310000
Direct Materials Added                          391600
Direct Labour                                         638000
Manufacturing Overhead                     307400


Normal losses are estimated to be 2½% of input during the period. Inspection takes place during the processing
operation, at which point damaged handles are separated from good handles and sold as scrap to local furniture manufacturers at $85 each.


At inspection, 2,000 handles were rejected as scrap. These units had reached the following degree of completion:
Transfer from Moulding 100%
Direct material added 40%
Conversion costs 20%
Work-in-progress at the end of January was 4,000 handles and had reached the following degree of completion:
Transfer from Moulding 100%
Direct material added 80%
Conversion costs 50%
Direct materials added and conversion costs are incurred uniformly throughout the process.


(a) Compute the equivalent units and cost per equivalent units for direct materials (From Moulding &Direct materials added) and conversion costs.


(b) Compute the:
 cost of the unexpected losses
 total cost of the handles completed and transferred out of the Packaging Department
 cost of ending work in process inventory in the Polishing Department
(c) Complete the Work in Process Inventory – Polishing Process T-account, clearly showing the ending balances.


(d) Prepare the journal entries for the:
 assignment of direct materials, direct labour incurred and the manufacturing overhead applied to
the Polishing Process
 cost of the units completed and transferred out to the Packaging Process.
(e) Given that 30% of the unexpected losses were as a result of pilferage, calculate Fen Furnishings true loss associated with the Polishing Process.