Question

Alpha Company, on March 1, 2017 has a beginning Work in Process inventory of zero. All materials are added into production at the beginning of its production. There is only one production WIP inventory. On March 1, Alpha started into production 10,000 units. At the end of the month there were 5,000 units completed and transferred into the Finished Goods Inventory. The ending WIP was 40% complete with respect to conversion. For the month of March the following costs were incurred and recorded in the WIP:

            Direct Material                      $20,000

            Direct Labor                              9,000

            Factory Overhead                   40,000

Alpha uses the weighted-average process costing method. Use this information to determine for the month of March: (Round & enter final answers to the nearest whole dollar.)

            1. the total cost transferred to the finished goods inventory

            2. the total cost of the ending Work in Process inventory

Answer 1

Answer:

1. Determination of the total cost transferred to the finished goods inventory :

Particulars	Amount
In respect of finished goods inventory:
: Direct material (5,000 units x $2)	$10,000
: Conversion (5,000 units x $7)	$35,000
total cost transferred to the finished goods inventory	$45,000

2. Determination of the total cost transferred to the ending work in progress:

Particulars	Amount
In respect of finished goods inventory:
: Direct material (5,000 units x $2)	$10,000
: Conversion (2,000 units x $7)	$14,000
total cost transferred to the finished goods inventory	$24,000

Note-1: Calculation of Equivalent units of production using the weighted average method:

Particulars	Direct Materials	Conversion
In respect of goods completed & transferred out:
: Material (5,000 x 100%)	5,000
: Conversion (5,000 x 100%)		5,000
In respect of ending work in progress:
: Material (5,000 x 100%)	5,000
: Conversion (5,000 x 40%)		2,000
Equivalent unit of production	10,000	7,000

Note-3: Cost per equivalent unit of production:

For Direct Materials:

Cost per equivalent unit of production = Direct material cost incurred / Equivalent unit of direct material

= $20,000 / 10,000

= $2 per unit

For Conversion:

Cost per equivalent unit of production = (Direct labor + Factory Overhead) / Equivalent unit of conversion

= ($9,000 + $40,000) / 7,000

= $7 per unit