Question

Superior Micro Products uses the weighted-average method in its process costing system. During January, the Delta Assembly Department completed its processing of 26,600 units and transferred them to the next department. The cost of beginning work in process inventory and the costs added during January amounted to $726,104 in total. The ending work in process inventory in January consisted of 3,800 units, which were 80% complete with respect to materials and 60% complete with respect to labor and overhead. The costs per equivalent unit for the month were as follows:

	Materials			Labor			Overhead
Cost per equivalent unit	$	13.00		$	4.00		$	7.80

Required:

1. Compute the equivalent units of materials, labor, and overhead in the ending work in process inventory for the month.

2. Compute the cost of ending work in process inventory for materials, labor, overhead, and in total for January.

3. Compute the cost of the units transferred to the next department for materials, labor, overhead, and in total for January.

4. Prepare a cost reconciliation for January. (Note: You will not be able to break the cost to be accounted for into the cost of beginning work in process inventory and costs added during the month.)

Answer 1

1. Equivalent Units = Ending WIP Inventory * Completion %

Equivalent Units for materials = 3800 * 80% = 3040 Units

Equivalent Units for Labor = 3000 * 60% = 2,280 Units

Equivalent Units for Overhead = 3000 * 60% = 2,280 Units

2. Computation of cost of ending Inventoy in WIP

cost of ending inventory for materials = 3,040 x 13.00 = $39,520
cost of ending inventory for labor = 2,280 x 4.00= $9,120
cost of ending inventory for overhead = 2,280 x 7.80 = $17,784

Total cost of ending inventory = $39,520 + $9,120 + $17,784 = $66,424

3 . Cost of Units transferred to next department

cost of ending work in process inventory for materials = 26,000 x 13.00 = $338,000
cost of ending work in process inventory for labor = 26,000 x 4.00= $104,000
cost of ending work in process inventory for overhead = 26,000 x7.80 = $202,800

Total cost of ending work in process inventory = $338,000 + $104,000 + $202,800 = $644,800

4. Cost reconciliation for january

Total cost to be accounted for $726,104 = cost of ending work in process inventory $66,424 + cost of units completed and transferred out 644,800

Total cost accounted for $726,104 ( total cost to be accounted for = cost of beginning work in process inventory + cost added to production during the period)