Question

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 55 percent complete in Stitching and 50 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					800			490			370			160
Units completed in Stitching					720			460			320			105
Units completed in Customizing								435			310			95
Materials	$	61,130		$	24,000		$	14,700		$	14,430		$	8,000
Conversion costs:
Stitching	$	58,260
Customizing		28,000
Total conversion costs	$	86,260

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?

Answer 1

Req A
Unit cost
Rookie	63.81
Novice	96.27
Hiker	105.27
Expert	116.27
Req b
Work In Process Inventory
Stitching	11,998
Customizing	5,075

Working Notes: (Req A)
Product	Material Cost (1)	No. of Units (2)
Rookie	24000	800
Novice	14700	490
Hiker	14430	370
Expert	8000	160
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	1820
Total Units accounted for:	1820
Units accounted for:
Completed and transferred out	1605	1605
Units in ending Inventory	215	118.25
Total Units accounted for:	1820	1723.25
	Total	Conversion Cost
Cost to be accounted for:
Cost in beginning WIP	0	0
Current Period costs	58260	58260
Total cost to be accounted for:	58260	58260
Cost per equivalent Units
Conversion cost		33.81
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	885
Total Units accounted for:	885
Units accounted for:
Completed and transferred out	840	840
Units in ending Inventory	45	22.5
Total Units accounted for:	885	862.5
	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		32.46

Cost of Units Transferred to Finished Goods	Rookie	Novice	Hiker	Expert
Unit Material Cost	30	30	39	50
Stitching Department Conversion cost	33.81	33.81	33.81	33.81
Customizing Department Conversion cost		32.46	32.46	32.46
Total	63.81	96.27	105.27	116.27
Working Note(Req 2:)
WIP Ending Inventory balance
Stitching Department
Material Cost	No. of Units	Unit Cost	Total Cost
Rookie	80	30	2,400
Novice	30	30	900
Hiker	50	39	1,950
Expert	55	50	2,750
Total material cost			8,000
Conversion costs	118.25	33.81	3,998
Total			11,998
Customising Department
Material Cost	No. of Units	Unit Cost	Total Cost
Novice	25	30	750
Hiker	10	39	390
Expert	10	50	500
Total material cost			1,640
Conversion costs:
From Stitching	80	33.81	2,705
From Customizing	22.5	32.46	730
Total Conversion Cost			3,435
Total			5,075