Question

Victory Company uses weighted-average process costing to account for its production costs. Conversion cost is added evenly throughout the process. Direct materials are added at the beginning of the process. During November, the company transferred 740,000 units of product to finished goods. At the end of November, the work in process inventory consists of 182,000 units that are 80% complete with respect to conversion. Beginning inventory had $539,370 of direct materials and $110,700 of conversion cost. The direct material cost added in November is $3,609,630, and the conversion cost added is $2,103,300. Beginning work in process consisted of 62,000 units that were 100% complete with respect to direct materials and 80% complete with respect to conversion. Of the units completed, 62,000 were from beginning work in process and 678,000 units were started and completed during the period.

1. Determine the equivalent units of production with respect to direct materials and conversion.
2. Compute both the direct material cost and the conversion cost per equivalent unit.

Answer 1

Requirement 1

Reconciliation of Units
A	Opening WIP	62,000
B	Introduced	8,60,000
C=A+B	TOTAL	9,22,000
D	Transferred	7,40,000
E=C-D	Closing WIP	1,82,000

Statement of Equivalent Units
		Material		Conversion Cost
	Units	Complete %	Equivalent units	Complete %	Equivalent units
Transferred	7,40,000	100%	7,40,000	100%	7,40,000
Closing WIP	1,82,000	100%	1,82,000	80%	1,45,600
Total	9,22,000	Total	9,22,000	Total	8,85,600

Requirement 2

Cost per Equivalent Units
COST	Material	Conversion Cost	TOTAL
Beginning WIP Inventory Cost	$         5,39,370	$           1,10,700	$               6,50,070
Cost incurred during period	$       36,09,630	$         21,03,300	$            57,12,930
Total Cost to be accounted for	$       41,49,000	$         22,14,000	$            63,63,000
Total Equivalent Units	9,22,000	8,85,600
Cost per Equivalent Units	$   4.50	$ 2.50