Question

	Welding department
	Units
	WIP, October 1 (85% material; 60% conversion)	4,300
	Units started in October	10,000
	Units completed and transferred to assembling	9,500
	WIP, October 31 (75% material, 40% conversion)	4,800
	Costs
	WIP, October 1
	Materials (85% complete)	$673,500
	Conversion (60% complete)	$341,640
	WIP value, October 1	$1,015,140
	Costs incurred in October
	Materials	$864,960
	Conversion	$463,840
	Costs incurred in October	$1,328,800
	Total costs	$2,343,940
	What is the value of goods transferred out of welding in October?
	What is the ending value of welding WIP on October 31?
	What is the cost of a single, completed unit transferred out of welding?

Answer 1

Using Weighted Average Method:

Cost Assignment and Reconciliation
Cost of units transferred out				EUP	Cost/ EUP	Total Cost
Direct Materials				9500	$ 117.44	$ 11,15,677.10
Conversion				9500	$   70.53	$   6,70,057.79
Total costs transferred out						$ 17,85,734.89
Cost of ending work in process				EUP	Cost/ EUP	Total Cost
Direct Materials				3600	$ 117.44	$   4,22,782.90
Conversion				1920	$   70.53	$   1,35,422.21
Total cost of ending work in process						$   5,58,205.11
Total costs accounted for							$ 23,43,940.00

Cost of units transferred out per unit				=	$ 1785734.89 / 9500
				=	$ 187.97

Workings:

Equivalent Units of Production (EUP) - Weighted Average Method
				Units	% Mat.	EUP- Mat.	% Conv.	EUP- Conv.
Units completed and transferred out				9500	100%	9500	100%	9500
Units in ending inventory				4800	75%	3600	40%	1920
Equivalent units of production						13100		11420

Cost per Equivalent Unit of Production
					Materials		Conversion
Beginning costs					$   6,73,500.00		$ 3,41,640.00
During the month costs					$   8,64,960.00		$ 4,63,840.00
Total cost				Costs	$ 15,38,460.00	Costs	$ 8,05,480.00
÷	Equivalent units of production			EUP	13100	EUP	11420
Cost per equivalent unit of production					$            117.44		$            70.53

Using FIFO Method:

Cost of Transferred Out Inventory
	Units	Costs
Direct Material	5845	$ 12,08,776.99	($ 673500 + 5845 x $ 91.58)
Conversion	6920	$    7,04,737.47	($ 341640 + 6920 x $ 52.47)
	Total	$ 19,13,514.46

Cost of Ending WIP
	Units	Cost/eq. units	Costs
Direct Material	3600	$               91.58	$ 3,29,683.01
Conversion	1920	$               52.47	$ 1,00,743.53
		Total	$4,30,426.54

Workings:

A)	Statement of equivalent production					Degree of completion
						Direct Material			Conversion
a)	Particulars	Units	Particulars	Units		%	Units		%	Units
	Opening WIP	4300	Transfer to next process:
	Material Introduced	10000	From O/p WIP	4300		15%	645		40%	1720
			From Current Intro	5200		100%	5200		100%	5200
			Closing WIP	4800		75%	3600		40%	1920
		14300		14300			9445			8840

Statement of cost per equivalent production
Element of costs	Units	Costs	Cost/eq. units
Direct Material	9445	$     8,64,960.00	$                91.58
Conversion	8840	$     4,63,840.00	$                52.47
			$             144.05