Question

Topic: Process Costing Question 2

Super Systems Pte Ltd, which uses the weighted-average method of process costing, reported the following:

	Direct materials ($)	Conversion ($)
Work-in-process, 1 September	42,000	20,000
September production costs	502,000	325,000

Conversations with the production supervisor revealed that materials are introduced at the start of the production process and conversion costs are incurred evenly throughout the process. The company started 29,000 units during the month of September. Work-in-process at the beginning and end of September totalled 3,000 units and 5,000 units, respectively, the latter batch being 60% complete.

Just prior to leaving on vacation, a trusted accounts executive was asked to compute the cost of September’s ending work-in-process inventory. Her following calculations showed a huge difference in unit cost when compared with the September 1’s figures:

Unit cost = ($502,000 + $325,000) / 5,000 units = $165.40

Required:

1. Compute the following amounts for the month of September.

2. The equivalent units for material and conversion (show completed units and ending work- in-process separately).

3. The cost per equivalent unit for material, conversion and total manufacturing.

4. The assignment of production costs to the September 30 work-in-process inventory and to goods completed and transferred out of the production plant.

5. Explain the errors made by the accounts executive in her calculations of the unit cost for September’s ending work-in-process.

Answer 1