In its first month of operations (May 2019), Holland Company’s Department 1 incurred charges of $72,000...

In its first month of operations (May 2019), Holland Company’s Department 1 incurred charges of $72,000 for direct materials (9,000 units), $38,700 for direct labor, and $13,950 for manufacturing overhead. At month end, 7,500 units had been finished and transferred out. Those remaining were finished with respect to material but only 40% finished with respect to conversion.

Assuming Holland uses the weighted average method and that materials are added at the beginning of the process and conversion occurs evenly, compute the following:

The equivalent units for material and conversion.
The cost per equivalent unit for material and conversion.
The total cost assigned to the units transferred out.
The total cost assigned to the ending inventory

In its first month of operations (May 2019), Holland Company’s Department 1 incurred charges of $72,000 for direct materials (9,000 units), $38,700 for direct labor, and $13,950 for manufacturing overhead. At month end, 7,500 units had been finished and transferred out. Those remaining were finished with respect to material but only 40% finished with respect to conversion.

Assuming Holland uses the weighted average method and that materials are added at the beginning of the process and conversion occurs evenly, compute the following
The equivalent units for material and conversion.
The cost per equivalent unit for material and conversion.
The total cost assigned to the units transferred out.
The total cost assigned to the ending inventory

Solutions

Expert Solution

Answer:

The equivalent units for material and conversion.= 9,000 for material and 8,100 for conversion.
The cost per equivalent unit for material and conversion. = $ 8.00 for material and $ 6.50 for conversion.
The total cost assigned to the units transferred out. = $ 108,750
The total cost assigned to the ending inventory = $ 15,900.

Working note:

*Statement of Equivalent Production*
Input	Particulars	Output	Material		Conversion cost
			%	Units	%	Units
9,000.00	Put and processed	7,500.00	100%	7,500.00	100%	7,500.00
	Closing stock	1,500.00	100%	1,500.00	40%	600.00
9,000.00	Total	9,000.00		9,000.00		8,100.00

	Costs:
	Opening		$ -		$ -
	May		$ 72,000		$ 52,650
	Total		$ 72,000		$ 52,650

	Cost per unit		$ 8.00		$ 6.50

Value of Put and processed
Material	$ 60,000.00
Conversion cost	$ 48,750.00
Total	$ 108,750.00

Value of Closing Stock
Material	$ 12,000.00
Conversion cost	$ 3,900.00
Total	$ 15,900.00

In case of any doubt, please comment.

ekkarill92 answered 1 year ago

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