Question

Overton Company has gathered the following information.

Units in beginning work in process		21,100
Units started into production		184,900
Units in ending work in process		24,700
Percent complete in ending work in process:
Conversion costs		60	%
Materials		100	%
Costs incurred:
Direct materials		$103,000
Direct labor		$263,576
Overhead		$187,500

Compute equivalent units of production for materials and for conversion costs.

		Materials		Conversion Costs
The equivalent units of production

  

Determine the unit costs of production. (Round unit costs to 2 decimal places, e.g. 2.25.)

		Materials		Conversion Costs
Unit costs		$		$

  

Show the assignment of costs to units transferred out and in process.

Transferred out		$
Ending work in process		$

Answer 1

Answer : (a.) Calculation of Equivalent units of Material :

Units transferred= Units in beginning work in process + Units started into production – Units in ending work in process

= 21100 + 184900 - 24700

= 181300

Equivalent units of production for materials = Units transferred out + (Units in ending work in process * % of work done)

= 181,300 + (24,700 * 100%)

=206,000

Equivalent units of production for conversion= Units transferred out + (Units in ending work in process * % of work done)

= 181300 + (24,700 * 60%)

=196120

(b.) Calculation of Unit Cost :

Unit cost of material costs= Direct material costs Incurred / equivalent units of materials

= 103,000 / 206,000

=0.50

Unit cost of conversion costs = (Direct labor Cost Incurred + overhead Cost Incurred ) / equivalent units of conversion

= (263576 + 187,500) / 196120

= 2.30

(c.)

Cost of units transferred = Units transferred out * (Unit cost of material costs + Unit cost of conversion costs)

= 181,300 * ($ 0.50 + $ 2.30)

=507640

Cost of units Work In Process = (Units of material in WIP * Units cost of material Cost) + (Units of conversion cost in WIP * Units cost of conversion cost)

= [(206000 - 181300) * $ 0.50) + [(206000 - 196120) * 2.30)

=12350 + 22724

= 35074