Question

uxguard Home Paint Company produces exterior latex paint, which it sells in one gallon containers. The company has two processing departments – Base Fab and Finishing. White paint which is used as a base for all the company’s paints, is mixed from raw ingredients in the Base Fab Department. Pigments are then added to the basic white paint, the pigmented paint is squirted under pressure into one gallon containers, and the containers are labeled and packed for shipping in the Finishing Department. Information relating to the company’s operations for April follow:

Production Data:

Units (gallons) in process, April 1: materials 100% complete, conversion 60% complete	30,000
Units (gallons) started into production during April	420,000
Units (gallons) completed and transferred to the Finishing Department	370,000
Units (gallons) in process, April 30: materials 50% complete, conversion 25% complete	80,000

Cost Data:

Work in process inventory, April 1:      Materials      Conversion	$92,000 $58,000
Cost added during April:      Materials      Conversion	$851,000 $995,000

a. Determine the equivalent units for the month of April       

b. Compute the cost per equivalent unit for the month of April.                 

c. Determine the total cost of ending work in process inventory.                

d. Determine the total cost of units transferred to the next process in April.

  

e. Prepare the cost reconciliation schedule for Finishing department for April

            

Answer 1

Solution

	Material	Conversion
Equivalent Units of Production	410,000	390,000

.

	Material	Conversion
Cost per equivalent Unit	$                                2.30	$                   2.70

.

	Material	Conversion
Cost of Ending Inventory	$ 91,902	$ 54,000	$ 145,902

.

	Material	Conversion
Cost of Units Completed and transferred	$ 850,098	$ 999,000	$ 1,849,098

.

Cost Reconciliation
Costs to be accounted for:
Beginning Wip cost	$ 150,000
Cost incurred during period	$ 1,845,000
Total cost to be accounted for	$ 1,995,000
Costs accounted for as follows:
Cost of Units Transferred Out	$ 1,849,098
Cost of Ending Wip	$ 145,902
Total cost accounted for	$ 1,995,000

Working

Statement of Equivalent Units(Weighted average)
				Material		Conversion
	Units			Complete %	Equivalent units	Complete %	Equivalent units
Transferred out	370,000			100%	370,000	100%	370,000
Ending WIP	80,000			50%	40,000	25%	20,000
Total	450,000			Total	410,000	Total	390,000

.

Cost per Equivalent Units (Weighted average)
COST		Material	Conversion	TOTAL
Beginning WIP Inventory Cost (A)		$ 92,000	$ 58,000	$ 150,000
Cost incurred during period (B)		$ 850,000	$ 995,000	$ 1,845,000
Total Cost to be accounted for (C=A+B)		$ 942,000	$ 1,053,000	$ 1,995,000
Total Equivalent Units(D)		410,000	390,000
Cost per Equivalent Units (E=C/D)		$                   2.30	$                     2.70	$                        5.00

.

Statement of cost (Weighted average)
Cost	Equivalent Cost/unit	Ending WIP		Transferred
		Units	Cost Allocated	Units	Cost Allocated
Material	$ 2.30	40,000	$          91,902.44	370,000	$        850,097.56
Conversion	$ 2.70	20,000	$          54,000.00	370,000	$        999,000.00
TOTAL	$ 1,995,000	TOTAL	$ 145,902	TOTAL	$ 1,849,098