Question

Process Costing – Packaging Department (Refer to Information 9)

Direct materials are added 90% at the beginning of the process and the remaining 10% are added when the cereal is 50% complete with the packaging process. Direct labor and overhead are added evenly throughout the process at the completion rate of the cereals.

Table 8 – Unit and cost information (Do not attempt to complete this table; it is for information only)

		Cost
	Physical Units	Transferred-in	Direct Materials	Direct Labor	Overhead
Beg WIP	4,000 (40% complete)	$15,000	$720	$282.78	$160
Transferred In	38,231	$139,569.12
End WIP	4,200 (30% complete)

Added during Qtr. 1:

Direct Materials -- $9,733

Direct Labor – 790 hours @ $11.00 per hour

Overhead – OH is applied based on predetermined OH rate and actual DL hours

1. Determine the number of units completed during quarter 1.

(Formula to be used: Beginning WIP + Transferred in = Units completed + Ending WIP)

4,000+38,231= units completed + 4,200

Units completed = 38,031 units

2. Compute the equivalent units using the weighted average method.

(Formula: Equivalent units = physical units x percentage of completion)

	Transferred in	DM	Conversion
Units completed	38,031
Ending inventory
Total equivalent units

3. Compute the cost per equivalent unit using the weighted average method.

	Total	Transferred in	DM	CC
Beginning WIP
Costs Added in Quarter 1
Total cost
Total equivalent units
Costs per equivalent units

4. Compute the cost of goods transferred to finished goods inventory

Costs of goods transferred = number of completed goods x total equivalent costs per unit

                                           

5. Compute the ending balance in WIP, Packaging

Answer 1

Weighted average cost
Beginning units	4000	Transferred out	38,031
Units received from preceeding	38231	Ending units	4,200
	42231		42231
Equivalent units	Transferred in	Material	Conversion cost
Units transferred                      A	38031	38031	38,031
Ending Units	4,200	4,200	4,200
Completion	100%	90%	30%
B	4200	3780	1260
Total units	42231	41811	39291
Predetrmined overhead rate	0.57	Per direct labor cost
Cost per equivalent units
Particulars	Transferred in	Material	Conversion cost
As at beginning	15000	720	442.78	16162.78
Added during the month	139569.12	9733	13607	162909
Cost to be accounted for	154569.12	10453	14050	179072
Total eqivalent units	42231	41811	39291
Cost per equivalent unit	3.66	0.25	0.36	4.27
Cost per equivalent unit = Cost to be accounted for / Total equivalent units

	Cost of ending work in progress
	Particulars	Transferred in	Material	Conversion cost
	Ending units	4,200	4,200	4,200
	Cost per equivalent units	3.66	0.25	0.36
	Completion	100%	90%	30%
	Total cost	15372.36	945.02	451
	Total cost	16768
	Cost of goods transferred
	Particulars	Transferred in	Material	Conversion cost
	Number of units	38031	38031	38031
	Cost per equivalent units	3.66	0.25	0.36
	Total amount	139196.76	9507.98	13599
	Total cost	162304