In: Accounting
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 20 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 | 630 | 530 | 290 | 270 | |||||||||||
Units completed in Stitching | 550 | 505 | 265 | 230 | |||||||||||
Units completed in Customizing | 495 | 240 | 200 | ||||||||||||
Materials | $ | 62,590 | $ | 22,680 | $ | 14,310 | $ | 11,020 | $ | 14,580 | |||||
Conversion costs: | |||||||||||||||
Stitching | $ | 59,260 | |||||||||||||
Customizing | 28,000 | ||||||||||||||
Total conversion costs | $ | 87,260 | |||||||||||||
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?
a. Calculation of Unit Cost of each model transferred to finished goods in August.
Rookie | Novice | Hiker | Expert | |
Cost Per Unit of Material (See Note 3) | $ 40 | $ 28 | $ 40.81 | $ 61.26 |
Cost Per Unit of Conversion Cost in Stitching (See Note 4) |
$37.41 |
$ 37.41 | $ 37.41 | $ 37.41 |
Cost Per Unit of Conversion Cost in Customizing (See Note 5) | $ 0 | $ 89..35 | $ 89.35 | $ 89.35 |
Total Cost Per Unit | $ 77.41 | $ 154.76 | $ 167.57 | $ 188.02 |
Note 1: Calculation of Equivalent Units of Stitching
Rookie | Novice | Hiker | Expert | Total | |
Units Completed in Stitching (100 % Complete) | 550 | 505 | 265 | 230 | 1550 |
Closing Work in Progress (20% Complete) |
16 (630-550) x20% |
5 (530-505) x20% |
5 (290-265) x20% |
8 (270-230) x20% |
34 |
Total Equivalent Units of Stitching | 566 | 510 | 270 | 238 | 1584 |
Note 2: Calculation of Equivalent Units of Customizing
Rookie | Novice | Hiker | Expert | Total | |
Units Completed in Customizing (100 % Complete) | 0 | 495 | 240 | 200 | 935 |
Closing Work in Progress (50% Complete) |
0 |
7.5 (510-495) x50% |
15 (270-240) x50% |
19 (238-200) x50% |
41.5 |
Total Equivalent Units of customizing | 0 | 502.5 | 255 | 219 | 976.5 |
Note 3: Calculation Materials Cost Per Unit
Rookie | Novice | Hiker | Expert | Total | |
Materials Cost | $ 22680 | $ 14310 | $ 11020 | $ 14580 | $ 62590 |
Total Equivalent Units of Stitching | 566 | 510 | 270 | 238 | 1584 |
Cost Per Unit of Material | $ 40 | $ 28 | $ 40.81 | $ 61.26 | $ 39.51 |
Note 4: Calculation Conversion Cost Per Unit in Stitching
Rookie | Novice | Hiker | Expert | Total | |
Conversion Cost |
$ 21175 ($ 59260 x566 /1584) |
$ 19080 ($ 59260 x510 /1584) |
$ 10100 ($ 59260 x270 /1584) |
$ 8905 ($ 59260 x238 /1584) |
$ 59260 |
Total Equivalent Units of Stitching | 566 | 510 | 270 | 238 | 1584 |
Cost Per Unit of Conversion Cost in Stitching | $ 37.41 | $ 37.41 | $ 37.41 | $ 37.41 | $ 37.41 |
Note 5: Calculation Conversion Cost Per Unit in Customizing
Rookie | Novice | Hiker | Expert | Total | |
Conversion Cost |
$ 0 |
$ 44900 ($87260 x502.5 /976.5) |
$ 22790 ($87260 x255 /976.5)) |
$ 19570 ($87260 x219/976.5) |
$ 87260 |
Total Equivalent Units of Customizing | 0 | 502.5 | 255 | 219 | 976.5 |
Cost Per Unit of Conversion Cost in customizing | $ 0 | $ 89.35 | $ 89.35 | $ 89.35 | $ 89.35 |
Answer 2: Calculation balance of the Work-in-Process Inventory on August 31 for Stitching and for Customizing
Rookie | Novice | Hiker | Expert | |
Closing Work in Progress of Switching |
16 |
5 |
5 |
8 |
Cost Per Unit of Stitching |
$ 77.41 ($ 40 + $37.41) |
$ 65.41 ($ 28 + $37.41) |
$ 78.22 ($ 40.81 + $37.41) |
$ 98.67 ($ 61.26 + $37.41) |
Cost of the Work-in-Process Inventory on August 31 for Stitching | $ 1238.56 | $ 327.05 | $ 391.1 | $ 789.36 |
Rookie | Novice | Hiker | Expert | |
Closing Work in Progress of Customizing |
0 |
7.5 |
15 |
19 |
Cost Per Unit of Customizing |
$ 0 |
$ 154.76 | $ 167.57 | $ 188.02 |
Cost of the Work-in-Process Inventory on August 31 for Customizing | $ 0 | $ 1160 | $ 2514 | $ 3572 |