Question

Morse Company manufactures basketball, Materials are added at the beginning of the production process and conversion costs are incurred uniformly. Production and cost data for the month of July 2014 are as follows:
Morse Company manufactures basketball balls. Materials are added early in the production process, and conversion costs are incurred evenly. The production and cost data for the month of July 2019 are as follows:

Production Data - Basketball Units Percent Complete
Work in Process Units, July 1 500 100% Materials, 60% Conversion
Units Started into Production 1,250
Work in process units, July 31 600 100% Materials, 40% Conversion

Data Cost - Basketballs

Work in Process, July 1
Materials $ 750
Conversion 600 $ 1,350
Direct materials 2,400
Direct Labor 1,580
Manufacturing overhead 1,295

Instructions:

(a) Calculate the following:

1. The equivalent production unit for materials and conversion costs.
2. The unit cost of production of materials and conversion costs.
3. The allocation of costs to the units transferred and in process at the end of the accounting period.

(b) Prepare a production cost report for the month of July for basketballs

(a) Calculate the following:
1. The equivalent unit of production for materials and conversion costs.
2. The unit cost of production for materials and conversion costs.
3. The assignment of costs to units transferred out and in process at thye end of accounting period.

(b) Prepare a production cost report for the month of July for the basketballs.

Answer 1

SOLUTION:

(a) 1. The equivalent production unit for materials and conversion costs.

	Materials	Conversion Costs
Units transferred	1150	1150
Work in process units, July 31	(600*100%) = 600	(600*40%)= 240
Equivalent units	1750	1390

Units transferred= Work in process units, July 1 + Units started - Work in process units, July 31

= 500+1250-600

= 1150 units

(a) 2. The unit cost of production of materials and conversion costs.

	Materials	Conversion Costs
Cost of work in process, July 1	$750	$600
Cost added during July	2400	(1580+1295)= 2875
Total costs	$3150	$3475
Equivalent units	1750	1390
Cost per equivalent unit	$1.80	$2.50

(a) 3. The allocation of costs to the units transferred and in process at the end of the accounting period.

Particulars	Amount	Amount
Transferred out ($1.80+2.50)*1150		$4945
Work in process, July 31
Materials (600*$1.80)	1080
Conversion costs (240*$2.50)	600	1680
Total costs		$6625