Question

 

The Matsui Lubricants plant uses the weighted-average method to account for its work-in-process inventories. The accounting records show the following information for a particular day.

Beginning WIP inventory
Direct materials	$	1,010
Conversion costs		527
Current period costs
Direct materials		24,060
Conversion costs		14,398

Quantity information is obtained from the manufacturing records and includes the following.

Beginning inventory	700	units	(70% complete as to materials, 54% complete as to conversion)
Current period units started	5,700	units
Ending inventory	1,900	units	(50% complete as to materials, 25% complete as to conversion)

Required:

a. Compute the equivalent units for the materials and conversion cost calculations.

b. Compute the cost per equivalent unit for direct materials and conversion costs.

Equivalent units for materials
Equivalent units for conversion costs

Cost Per Equivalent Unit Materials   Conversion costs

Answer 1

Solution

	Material	Conversion
Equivalent Units of Production	5,450	4,975

.

	Material	Conversion
Cost per equivalent Unit	$ 4.60	$ 3.00

.

	Material	Conversion	Total
Cost of Ending work in process Inventory	$ 4,370	$ 1,425	$ 5,795
Cost of Units Completed and transferred out	$ 20,700	$ 13,500	$ 34,200

Working

Reconciliation of Units
A	Beginning WIP	700
B	Introduced	5,700
C=A+B	TOTAL	6,400
D	Transferred out	4,500
E=C-D	Ending WIP	1,900

.

Statement of Equivalent Units(Weighted average)
			Material	Conversion
	Units			Complete %	Equivalent units	Complete %	Equivalent units
Transferred out	4,500			100%	4,500	100%	4,500
Ending WIP	1,900			50%	950	25%	475
Total	6,400			Total	5,450	Total	4,975

.

Cost per Equivalent Units (Weighted average)
COST		Material	Conversion	TOTAL
Beginning WIP Inventory Cost (A)		$ 1,010	$ 527	$ 1,537
Cost incurred during period (B)		$ 24,060	$ 14,398	$ 38,458
Total Cost to be accounted for (C=A+B)		$ 25,070	$ 14,925	$ 39,995
Total Equivalent Units(D)		5,450	4,975
Cost per Equivalent Units (E=C/D)		$ 4.60	$ 3.00	$ 7.60

.

Statement of cost (Weighted average)
Cost	Equivalent Cost/unit	Ending WIP	Transferred
		Units	Cost Allocated	Units	Cost Allocated
Material	$ 4.60	950	$      4,370.00	4,500	$          20,700.00
Conversion	$ 3.00	475	$      1,425.00	4,500	$          13,500.00
TOTAL	$ 39,995	TOTAL	$ 5,795	TOTAL	$ 34,200