Question

Hi-Test Company uses the weighted-average method of process costing to assign production costs to its products. Information for the company's first production process September follows. Assume that all materials are added at the beginning of this production process, and that conversion costs are added uniformly throughout the process. Work in process inventory, September 1 (3,500 units, 100% complete with respect to direct materials, 70% complete with respect to conversion; consists of $95,800 of direct materials cost, $97,955 conversion cost $ 193,755 Costs incurred in September Direct materials $ 440,000 Conversion $ 386,000 Work in process inventory, September 30 (8,500 units, 100% complete with respect to direct materials, 30% complete with respect to conversion) ? Units started in September 34,500 Units completed and transferred out 29,500 Required: Compute each of the following using the weighted-average method of process costing.

1. & 2. The number of equivalent units for materials and conversion for the month. 3. & 4. The cost per equivalent unit of materials and conversion for the month. 5. The total cost of goods transferred out. 6. The total cost of ending work in process inventory.

Answer 1

1&2. Computation of equivalent units of production under average method:

		Material		Conversion
Output	Units	% completion	Units	% completion	Units
Units completed and transferred	29,500	100%	29,500	100%	29,500
Closing WIP	8,500	100%	8,500	30%	2,550
Total	38,000		38,000		32,050

Under weighted - average method, it is assumed that opening inventory is also completed in this period only.

3&4. Calculation of cost per equivalent unit

Particulars	Material	Conversion
Opening WIP - Cost	$95,800	$97,955
Cost in current period	$440,000	$386,000
Total Cost	$535,800	$483,955
Equivalent units	38,000	32,050
Cost per equivalent unit	$14.1	$15.1

5. Calculation of total cost of goods transferred out:

= Equivalent units of production * cost per equivalent unit

Material : 29,500 * $14.1 = $415,950

Conversion : 29,500 * $15.1 = $445,450

Total cost of goods transferred $ 861,400

6. Calculation of total cost of ending work in process

Material : 8,500 * $14.1 = $119,850

Conversion : 2,550 * $15.1 = $ 38,505

Total cost of ending inventory  $ 158,355