Question

5) A company has identified the following overhead costs and cost drivers for the coming year:

Overhead Item	Cost Driver	Budgeted Cost	Budgeted Activity Level
Machine setup	Number of setups	$ 20,000	200
Inspection	Number of inspections	130,000	6,500
Material handling	Number of material moves	80,000	8,000
Engineering	Engineering hours	50,000	1,000
Total		$280,000

The following information was collected on three jobs that were completed during the year:

	Job 101	Job 102	Job 103
Direct materials	$5,000	$12,000	$8,000
Direct labor	$2,000	$ 2,000	$4,000
Units completed	100	50	200
Number of setups	1	2	4
Number of inspections	20	10	30
Number of material moves	30	10	50
Engineering hours	10	50	10

If the company uses activity-based costing, compute the cost of each unit of Job 102.

Use the following information to answer questions 6, 7, and 8.

6) Kimbeth Manufacturing uses a process cost system to manufacture Dust Density Sensors for the mining industry. The following information pertains to operations for the month of May. Units Beginning work-in-process inventory, May 1 16,000 Started in production during May 100,000 Completed production during May 92,000 Ending work-in-process inventory, May 31 24,000

The beginning inventory was 60% complete for materials and 20% complete for conversion costs. The ending inventory was 90% complete for materials and 40% complete for conversion costs. Costs pertaining to the month of May are as follows: Beginning inventory costs are materials, $54,560; direct labor, $20,320; and factory overhead, $15,240. Costs incurred during May are materials used, $468,000; direct labor, $182,880; and factory overhead, $391,160.

6) Using the weighted-average method, the equivalent unit cost of materials for May is __________?

7) Using the weighted-average method, the equivalent unit conversion cost for May is __________?

8) Using the weighted-average method, the total cost of the units in the ending work-in-process inventory at May 31 is __________?

Answer 1

SOLUTION:

6 . The equivalent unit cost of materials for May (Using the weighted-average method)

Statement of Equivalent Production:

Materials

Conversion Cost

Particulars	Output Units	%	Units	%	Units
Completed Production	92000	100%	92000	100%	92000
Ending Work in Progress	24000	90%	21600	40%	9600
Total			113600		101600

Equivalent Unit Cost of Materials = Total Cost / Equivalent Units of Materials

= (54560+468000) / 113600

= 522650 / 113600

= $ 4.60 per Unit

7. The equivalent unit conversion cost for May (Using the weighted-average method):

Equivalent unit conversion cost = (20320 + 15240 + 182880 + 391160) / 101600

= 609600 / 101600

= $ 6 per unit

8. The total cost of the units in the ending work-in-process inventory at May 31:

Particulars	Amount
Materials (21600 * 4.6)	$ 99,360
Conversion Cost (9600 * 6)	$ 57,600
Total cost of the units in the ending work-in-process	$ 156,960