Question

Use the following information to respond to the questions that immediately follow. Assume that direct materials are added at the beginning of the production process, and conversion costs are added throughout the production process.

					Degree of completion		Costs incurred
	Item			Physical units	Materials	Conversion	Materials	Conversion
	Beginning WIP Inventory			3,000		20%	$     30,000	$     12,000
	Started during the period			7,000			$     56,000	$     42,000
	Transferred out			8,000
	Ending WIP Inventory			2,000	80%	50%
	a. Units started and completed during the period
	b. Equivalent units for conversion (WA method)
	c. Per unit costs for materials (FIFO method)
	d. Total cost per equivalent unit (WA method)
	e. Total product costs assigned to ending WIP inventory (FIFO method)

This image is complete.

Answer 1

Solution

a. Units started and completed during the period = 5000 units

b. Equivalent units for conversion (WA method) = 9000 units

c. Per unit costs for materials (FIFO method) = $ 8.48 per unit

d. Total cost per equivalent unit (WA method) $14.96

e. Total product costs assigned to ending WIP inventory (FIFO method)= $18, 576

Working

Reconciliation of Units
A	Beginning WIP	3,000
B	Introduced	7,000
C=A+B	TOTAL	10,000
D	Transferred out	8,000
E=C-D	Ending WIP	2,000

.

Statement of Equivalent Units(Weighted average)
				Material		Conversion
	Units			Complete %	Equivalent units	Complete %	Equivalent units
Transferred out	8,000			100%	8,000	100%	8,000
Ending WIP	2,000			80%	1,600	50%	1,000
Total	10,000			Total	9,600	Total	9,000

.

Cost per Equivalent Units (Weighted average)
COST		Material	Conversion	TOTAL
Beginning WIP Inventory Cost (A)		$ 30,000	$ 12,000	$ 42,000
Cost incurred during period (B)		$ 56,000	$ 42,000	$ 98,000
Total Cost to be accounted for (C=A+B)		$ 86,000	$ 54,000	$ 140,000
Total Equivalent Units(D)		9,600	9,000
Cost per Equivalent Units (E=C/D)		$                   8.96	$                     6.00	$                     14.96

.

STEP 1 (FIFO)
Reconciliation of Units
	Units	% already completed		% completed this period
		Material	Conversion	Material	Conversion
Beginning WIP	3,000	100%	20%	0%	80%
Units introduced	7,000
Total units to be accounted for	10,000
Completed and Transferred unit	8,000	0%	0%	100%	100%
Ending WIP	2,000	0%	0%	80%	50%

.

STEP 2 (FIFO)
Equivalent Units
	Total Units	Material		Conversion
Units Transferred:		% completed this period	Equivalent Units	% completed this period	Equivalent Units
From WIP	3,000	0%	-	80%	2,400
From units started/Introduced	5,000	100%	5,000	100%	5,000
Total	8,000		5,000		7,400
	Total Units	Material		Conversion
Ending WIP		% completed this period	Equivalent Units	% completed this period	Equivalent Units
Total	2,000	80%	1,600	50%	1,000
Total EUP	10,000		6,600		8,400

.

STEP 3
Cost per Equivalent Units AND Cost to be accounted for
	Material		Conversion		TOTAL
Cost incurred in Current Period	$ 56,000		$ 42,000		$ 98,000
Total Equivalent Units	6,600		8,400
Cost per Equivalent Units	$ 8.48		$ 5.00		$ 13.48
Cost of Beginning WIP					$ 42,000
Total cost to be accounted for					$ 140,000

.

STEP 4
Cost report [Including Reconciliation]
	Cost of	Units Transferred		8,000.00	units
		Equivalent Units [Step 2]	Cost per Equivalent Units [Step 3]	Cost of Units Transferred	TOTAL
A	From Beginning WIP:
	Material	-	$ 8.48	$ 0
	Conversion	2,400	$ 5.00	$ 12,000	$ 12,000
B	From units started & completed
	Material	5,000	$ 8.48	$ 42,424
	Conversion	5,000	$ 5.00	$ 25,000	$ 67,424
C=A+B	Total				$ 79,424
D	Cost of Beginning WIP				$ 42,000
E=C+D	Total Cost of Units transferred				$           121,424.24
	Cost of	Ending WIP		2,000.00	units
		Equivalent Units [Step 2]	Cost per Equivalent Units [Step 3]	Cost of Ending WIP	TOTAL
F	Material	1,600	$ 8.48	$ 13,576
G	Conversion	1,000	$ 5.00	$ 5,000
H = F + G	Total Cost of Ending WIP				$ 18,576