Question

big band corporation produces a semiconductor chip used on communications. the direct materials are added at hte start of the production process while conversion costs are added uniformly throughout the production process. big band had no inventory at the start of june. during the month it incurred direct material cost of $935,750 and conversion costs of $4,554,000. big band started 475,000 chips and completed 425,000 of them in june. ending inventory was 50% complete as to conversion costs.

Compute​ (a) the equivalent units of work done in​ June, and​ (b) the total manufacturing cost per chip. Allocate the total costs between the completed chips and those in ending inventory.

Answer 1

• Working

EUP - Weighted Average Method	Units	% Material	EUP Materials	% Conversion	EUP - Conversion
Units TRANSFERRED	425,000	100%	425,000	100%	425,000
Units of ENDING WIP	50,000	100%	50,000	50%	25,000
Equivalent Units of Production			475,000		450,000

• Requirement [a]
  Equivalent units:
  >Material = 475,000 units
  >Conversion cost = 450,000 units

• Working for Cost allocation

COST per EUP			Material		Conversion
Cost of Beginning WIP			$                          -		$                                                 -
Cost incurred during the period			$        935,750.00		$                            4,554,000.00
Total Costs		Costs	$        935,750.00	Costs	$                            4,554,000.00
Equivalent units of production		EUP	475,000	EUP	450,000
Cost per EUP			$              1.97000		$                                   10.12000

Cost of Units Transferred Out	EUP	Cost per EUP	Total Cost
- Direct Materials	425,000	$                      1.97	$        837,250.00
- Conversion	425,000	$                    10.12	$    4,301,000.00
Total Cost transferred Out				$        5,138,250.00 = ANswer
Cost of ending WIP	EUP	Cost per EUP	Total Cost
- Direct Materials	50,000	$                      1.97	$          98,500.00
- Conversion	25,000	$                    10.12	$        253,000.00
Total cost of ending WIP				$            351,500.00 = Answer

• Requirement [b]

Completed chips cost = $ 5,138,250

Ending Inventory chip cost = $ 351,500