Question

Victory Company uses weighted-average process costing to account for its production costs. Direct labor is added evenly throughout the process. Direct materials are added at the beginning of the process. During November, the company transferred 700,000 units of product to finished goods. At the end of November, the goods in process inventory consists of 180,000 units that are 30% complete with respect to labor. Beginning inventory had $420,000 of direct materials and $139,000 of direct labor cost. The direct material cost added in November is $2,220,000, and the direct labor cost added is $3,254,000. Beginning work in process consisted of 60,000 units that were 100% complete with respect to direct materials and 80% complete with respect to conversion. Of the units completed, 60,000 were from beginning work in process and 640,000 units were started and completed during the period.

1. Determine the equivalent units of production with respect to (a) direct materials and (b) conversion
2. Compute both the direct material cost and the conversion cost per equivalent unit
3. Compute the direct material cost and the conversion cost assigned to (a) units completed and transferred out and (b) ending work in process inventory

Answer 1

• All working forms part of the answer
• Requirement 1: Equivalent units

EUP - Weighted Average Method	Units	% Material	EUP Materials	% Conversion	EUP - Conversion
Units TRANSFERRED	700,000	100%	700,000	100%	700,000
Units of ENDING WIP	180,000	100%	180,000	30%	54,000
Equivalent Units of Production			880,000		754,000

• Requirement 2

COST per EUP			Material		Conversion
Cost of Beginning WIP			$        420,000.00		$                                139,000.00
Cost incurred during the period			$    2,220,000.00		$                            3,254,000.00
Total Costs		Costs	$    2,640,000.00	Costs	$                            3,393,000.00
Equivalent units of production		EUP	880,000	EUP	754,000
Cost per EUP			$              3.00		$                                      4.5

• Requirement 3

[Part A]

Cost of Units Transferred Out	EUP	Cost per EUP	Total Cost
- Direct Materials	700,000	$                      3.00	$    2,100,000.00
- Conversion	700,000	$                      4.50	$    3,150,000.00
Total Cost transferred Out				$        5,250,000.00

[Part B]

Cost of ending WIP	EUP	Cost per EUP	Total Cost
- Direct Materials	180,000	$                      3.00	$        540,000.00
- Conversion	54,000	$                      4.50	$        243,000.00
Total cost of ending WIP				$            783,000.00