Question

Below is information related to the process costing system used by Nelson Corporation.

Nelson Corporation has the following information available for May of the current year:

Beginning Work in process inventory
	(25% complete as to conversion)	10,000 units
Started		100,000 units
Ending work in process inventory
	(30% complete as to conversion)	10,000 units
Beginning Work in Process Inventory Costs:
	Material	$20,100
	Conversion	20,300
Current Period Costs:
	Material	$330,000
	Conversion	1,090,695

All material is added at the start of production and all products completed are transferred out.

a. Prepare an equivalent units schedule using the (a) FIFO and (b) weighted average method.

b. Prepare a schedule showing the computation for cost per equivalent unit assuming the (a) FIFO and (b) weighted average method.

c. Prepare a schedule showing the assignment of costs assuming the (a) FIFO and (b) weighted average method.

Answer 1

Solution a:

Nelson Corporation
Computation of Equivalent unit (FIFO)
Particulars	Physical units	Material	Conversion
Units to be accounted for:
Beginning WIP Inventory	10000
Units started this period	100000
Total unit to be accounted for	110000
Units Accounted for:
Units completed and transferred out
From beginning inventory Material - 0% Conversion - 75%	10000	0	7500
Started and completed currently	90000	90000	90000
Units in ending WIP Material - 100% Conversion - 30%	10000	10000	3000
Total units accounted for	110000	100000	100500

Computation of Equivalent unit of Production - Weighted Average - Nelson Corporation
Flow of Production	Flow of physical units	Material	Conversion
Units Accounted for:
Unit completed & Transferred out	100000	100000	100000
Ending WIP:	10000
Material (100%)		10000
Conversion (30%)			3000
Equivalent units of production	110000	110000	103000

Solution b:

Nelson Corporation
Computation of Cost per Equivalent unit
Particulars	Total cost	Material	Conversion
Current period cost	$1,420,695.00	$330,000.00	$1,090,695.00
Equivalent units		100000	100500
Cost per equivalent unit		$3.3000	$10.8527

Computation of Cost per equivalent unit of Production - Weighted Average - Nelson Corporation
Particulars	Material	Conversion
Opening WIP	$20,100.00	$20,300.00
Cost Added during May	$330,000.00	$1,090,695.00
Total cost to be accounted for	$350,100.00	$1,110,995.00
Equivalent units of production	110000	103000
Cost per Equivalent unit	$3.1827	$10.7864

Solution c:

Nelson Corporation
Producton cost report - FIFO
Particulars	Total cost	Material	Conversion
Cost Accounted for :
Cost assigned to unit transferred out:
Cost from beginning WIP Inventory	$40,400	$20,100	$20,300
Current cost added to complete beginning WIP:
Material	$0	$0
Conversion (7500 * $10.8527)	$81,395		$81,395
Total Cost from beginning inventory	$121,795	$20,100	$101,695
Current cost of unit started and completed:
Material (90000*$3.30)	$297,000	$297,000
Conversion (90000*$10.8527)	$976,742		$976,742
Total cost of unit started and completed	$1,273,742	$297,000	$976,742
Total cost of unit transferred out	$1,395,537	$317,100	$1,078,437
Cost assigned to ending WIP:
Material (10000*$3.30)	$33,000	$33,000
Conversion (3000*$10.8527)	$32,558		$32,558
Total ending WIP inventory	65,558	33,000	32,558
Total Cost accounted for	$1,461,095	$350,100	$1,110,995

Computation of Cost of ending WIP and units completed & transferred out -Weighted Average - Nelson Corporation
Particulars	Material	Conversion	Total
Equivalent unit of Ending WIP	10000	3000
Cost per equivalent unit	$3.1827	$10.7864
Cost of Ending WIP (Equivalent unit * Cost per equivalent unit)	$31,827	$32,359	$64,186
Units completed and transferred	100000	100000
Cost of units completed & Transferred (Unit completed * cost per equivalent unit)	$318,273	$1,078,636	$1,396,909

Cost Reconciliation - Weighted Average - Nelson Corporation
Particulars	Amount
Costs to be accounted for:
Cost of beginning WIP inventory	$40,400.00
Cost added to production	$1,420,695.00
Total Cost to be accounted for	$1,461,095.00
Costs accounted for as follows:
Cost of unit transferred out	$1,396,909
Ending WIP	$64,186
Total cost accounted for	$1,461,095