Question

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Miller Outdoor Equipment (MOE) makes four models of tents. The model names are Rookie, Novice, Hiker,...

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?

Solutions

Expert Solution

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

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