Question

In: Accounting

Miller Outdoor Equipment (MOE) makes four models of tents. The model names are Rookie, Novice, Hiker,...

Miller Outdoor Equipment (MOE) makes four models of tents. The model names are Rookie, Novice, Hiker, and Expert. MOE manufactures the tents in two departments: Stitching and Customizing. All four models are processed initially in Stitching where all material is assembled and sewn into a basic tent. The Rookie model is then transferred to finished goods. After processing in Stitching, the other three models are transferred to Customizing for additional add-ons, and then transferred to finished goods.

There were no beginning work-in-process inventories on August 1. Data for August are shown in the following table. Ending work in process is 30 percent complete in Stitching and 25 percent complete in Customizing. Conversion costs are allocated based on the number of equivalent units processed in each department.

Total Rookie Novice Hiker Expert
Units started 640 520 460 250
Units completed in Stitching 575 490 405 175
Units completed in Customizing 480 380 145
Materials $ 64,340 $ 20,480 $ 17,680 $ 15,180 $ 11,000
Conversion costs:
Stitching $ 52,260
Customizing 28,000
Total conversion costs $ 80,260

Required:

a. What is the unit cost of each model transferred to finished goods in August?

b. What is the balance of the Work-in-Process Inventory on August 31 for Stitching? For Customizing?

Product Unit Cost
Rookie
Novice
Hiker
Expert
Work-in-Process Inventory
Stitching
Customizing


Solutions

Expert Solution

Final Answer:
Req A
Unit cost
Rookie 62.52
Novice 91.93
Hiker 90.93
Expert 101.93
Req b
Work In Process Inventory
Stitching      10,275
Customizing         4,914
Working Notes: (Req A)
Product Material Cost (1) No. of Units (2)
Rookie 20480 640
Novice 17680 520
Hiker 15180 460
Expert 11000 250
Conversion cost per equivalent Units - Stitching
Physical Units Conversion cost
Eq. Units
Flow of Units:
Units to be accounted for:
   Beginning WIP inventory 0
   Units started this period 1870
Total Units accounted for: 1870
Units accounted for:
    Completed and transferred out 1645 1645
    Units in ending Inventory 225 67.5
Total Units accounted for: 1870 1712.5
Total Conversion Cost
Cost to be accounted for:
   Cost in beginning WIP 0 0
   Current Period costs 52260 52260
     Total cost to be accounted for: 52260 52260
Cost per equivalent Units
    Conversion cost 30.52
Conversion cost per equivalent Units - Customizing
Physical Units Conversion cost
Eq. Units
Flow of Units:
Units to be accounted for:
   Beginning WIP inventory 0
   Units started this period 1070
Total Units accounted for: 1070
Units accounted for:
    Completed and transferred out 1005 1005
    Units in ending Inventory 65 16.25
Total Units accounted for: 1070 1021.25
Total Conversion Cost
Cost to be accounted for:
   Cost in beginning WIP 0 0
   Current Period costs 28000 28000
     Total cost to be accounted for: 28000 28000
Cost per equivalent Units
    Conversion cost 27.42

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Cost of Units Transferred to Finished Goods Rookie Novice Hiker Expert
Unit Material Cost 32 34 33 44
Stitching Department Conversion cost 30.52 30.52 30.52 30.52
Customizing Department Conversion cost 27.42 27.42 27.42
Total 62.52 91.93 90.93 101.93
Working Note(Req 2:)
WIP Ending Inventory balance
Stitching Department
Material Cost No. of Units Unit Cost Total Cost
Rookie               65                  32          2,080
Novice               30                  34          1,020
Hiker               55                  33          1,815
Expert               75                  44          3,300
Total material cost          8,215
Conversion costs 67.5 30.52          2,060
Total       10,275
Customising Department
Material Cost No. of Units Unit Cost Total Cost
Novice               10                  34             340
Hiker               25                  33             825
Expert               30                  44          1,320
Total material cost          2,485
Conversion costs:
   From Stitching               65 30.52          1,984
    From Customizing 16.25 27.42             446
Total Conversion Cost          2,429
Total          4,914