Question

Question 6 - Halsey Company makes small sailboats. During the most recent month, the following activity was recorded in the Hull Fabrication Department for conversion costs.

Work in process, beginning (80% complete).................	15,000	units
Units started into production.............................................	180,000	units
Units transferred to the next department........................	175,000	units
Work in process, ending (30% complete).......................	20,000	units
Conversion Costs:
Work in process, beginning...............................................	$24,000
Conversion costs incurred during the month.................	$338,000

Required

Assuming that the company uses the weighted average method:

1. Compute the equivalent units of production
2. Compute the cost per equivalent unit
3. Compute the cost of units in ending work in process inventory
4. Compute the cost of the units transferred out

Answer 1

a. Computation of equivalent units of production:

Units transferred to the next department = 175,000

Work in process, ending (20,000 units × 30% complete) =  6,000

Equivalent units of production = 175000 +6000 = 181,000 units

b.

Computation of cost per equivalent unit:

Cost of beginning work in process inventory = $ 24,000

Costs added during the period = 338,000

Total cost = 338000 + 24000 = $362,000

Cost per equivalent unit = 362000 / 181000 = $2

c.

Computation of cost of units in ending work in process inventory:

Equivalent units of production of units in ending work in process inventory = 6,000

Cost per equivalent unit = $2 per

Cost of units in ending work in process inventory = 6000 *2 = $12,000

d.

Computation of cost of units transferred out:

Units transferred to the next department =175,000

Cost per equivalent unit =$2 per

Cost of units transferred out = 175000 * 2 = $350,000