In: Accounting
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?
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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 |
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 |