Question

"I think we goofed when we hired that new assistant controller," said Ruth Scarpino, president of Provost Industries. "Just look at this report that he prepared for last month for the Finishing Department. I can’t understand it."

Finishing Department costs:
Work in process inventory, April 750 units; materials 100% complete; conversion 60% complete	$	8,510	*
Costs transferred in during the month from the preceding department, 2,250 units		22,870
Materials cost added during the month		8,766
Conversion costs incurred during the month		19,380
Total departmental costs	$	59,526
Finishing Department costs assigned to:
Units completed and transferred to finished goods, 2,400 units at $24.800 per unit	$	59,526
Work in process inventory, April 30, 600 units; materials 0% complete; conversion 50% complete		0
Total departmental costs assigned	$	59,526

*Consists of cost transferred in, $4,280; materials cost, $2,010; and conversion cost, $2,220.

"He's struggling to learn our system," replied Frank Harrop, the operations manager. "The problem is that he's been away from process costing for a long time, and it's coming back slowly."

"It's not just the format of his report that I'm concerned about. Look at that $24.800 unit cost that he's come up with for April. Doesn't that seem high to you?" said Ms. Scarpino.

"Yes, it does seem high; but on the other hand, I know we had an increase in materials prices during April, and that may be the explanation," replied Mr. Harrop. "I’ll get someone else to redo this report and then we can see what’s going on."

Provost Industries manufactures a ceramic product that goes through two processing departments—Molding and Finishing. The company uses the weighted-average method in its process costing.

Required:

1-a. Calculate the equivalent units of production.

1-b. Calculate the cost per equivalent unit. (Round your answers to 2 decimal places.)

1-c. How much cost should have been assigned to the ending work in process inventory? (Round your intermediate calculations to 2 decimal places.)

1-d. How much cost should have been assigned to the units completed and transferred to finished goods? (Round your intermediate calculations to 2 decimal places.)

Thank you

Answer 1

• All working forms part of the answer
• Working

Reconciliation of Units
Opening WIP	750
Introduced	2250
TOTAL	3000
Transferred	2400
Closing WIP	600

• Requirement 1’a’ Equivalent Units

Statement of Equivalent Units
		Cost transferred		Material		Conversion Cost
	Units	Complete %	Equivalent units	Complete %	Equivalent units	Complete %	Equivalent units
Transferred	2400	100%	2400	100%	2400	100%	2400
Closing WIP	600	100%	600	0%	0	50%	300
Total	3000	Total	3000	Total	2400	Total	2700

Equivalent Units:

Cost transferred = 3000 units
Material = 2400 units
Conversion Cost = 2700 units.

• Requirement 1’b’ Cost per Equivalent Units

Cost per Equivalent Units
COST	Cost Transferred	Material cost	Conversion cost	TOTAL
Included in Beginning Inventory	$    4,280.00	$    2,010.00	$    2,220.00	$    8,510.00
Cost incurred	$ 22,870.00	$    8,766.00	$ 19,380.00	$ 51,016.00
Total cost	$ 27,150.00	$ 10,776.00	$ 21,600.00	$ 59,526.00
Total Equivalent Units	3000	2400	2700
Cost per Equivalent Units [Answers]	$9.05	$4.49	$8

• Requirement 1 ‘c’

Cost assigned to Ending Work in process of 600 units

Cost assigned = Equivalent Units x Cost per Equivalent Units

600 units x $ 9.05 (Cost transferred) = $ 5430
0 units x $ 4.49 (material) = $ 0
300 units x $ 8 (Conversion cost) = $ 2400

Total cost assigned = 5430 + 0 +2400 = $ 7,830

• Requirement ‘d’

Cost assigned Units completed and transferred 2400 units

Cost assigned = Equivalent Units x Cost per Equivalent Units

2400 units x $ 9.05 (Cost transferred) = $ 21,720
2400 units x $ 4.49 (material) = $ 10,776
2400 units x $ 8 (Conversion cost) = $ 19,200

Total cost assigned = 21720 + 10776 + 19200 = $ 51,696