Question

Highlander Corporation is a manufacturer that uses the average cost method to account for costs production. Highlander manufactures a product that is produced in three separate departmenst: Molding, Assembling, and Finshing. The following information was obtained for the assembling department for the month of June. Work in process, Jun 1 : 4,000 units composed of the following: Transferred in from the molding department Amount 60,000 percent of completion 100%, Cost added by the assembling department: Direct Materials $ 0 , percentage of completion 0%, Direct Labor amount 12,300, percent of completion 60%. factory overhead 4,700, percentage of completion 50%, total amount !7,00 , Work in process, June 1 amount $ 77,000. The following activity occured during the month of June: 1) 20,000 units were transferred in from the molding department at a cost of $ 300,000. 2) costs were added by the assembling department as follows: Direct materials $ 93,600, direct labor $ 43,200, Factory overhead $ 19,420.,Total $ 156.000. 3) materials are added at the end of the process.. 4) 18,000 units were completed and transferred to the finishing department, At June 30, 6,000 units were still in process. The degree of completion of work in process at June 30 follows: Direct labor 70%. Factory Overhead 35%. Requiered: Prepare in good form a cost of production for the assembling department for the month of June. Show supporting computations in good form. The report should include: A) equivalent units of production. B) Total manufacturing costs. C) Cost per equivalent unit. D) Dollar amount of ending work in process, E) Dollar amount of inventory cost transferred out.

Answer 1

A.

		Equivalent units
	Physical units	Transferred in	Direct material	Direct labor	Factory overhead
Units completed and transferred out	18,000	18,000	18,000	18,000	18,000
Ending work in process	6,000	6,000	0	4,200 (6,000*70%)	2,100 (6,000*35%)
Total		24,000	18,000	22,200	20,100

B.

Total manufacturing cost = Transferred in cost + Cost added during the period

Total manufacturing cost = $300,000+93,600+43,200+19,420 = $456,220

C.

	Transferred in cost	Direct material	Direct labor	Factory overhead
Cost in beginning work in process	$60,000	$0	$12,300	$4,700
Cost added during the period	300,000	93,600	43,200	19,420
Total cost	$360,000	$93,600	$55,500	$24,120
Total equivalent units	24,000	18,000	22,200	20,100
Cost per equivalent unit	$15	$5.2	$2.5	$1.2

D.

Dollar amount of ending work in process:

Transferred in costs (6,000*$15)	$90,000
Direct labor (4,200*$2.5)	10,500
Factory overhead (2,100*$1.2)	2,520
Total	$103,020

E.

Dollar amount of inventory cost transferred out = 18,000*$23.9 ($15+5.2+2.5+1.2) = $430,200