Question

Samantha's Office Supplies manufactures desk organizers in its Processing Department. Direct materials are included at the inception of the production cycle and must be bundled in single kits for each unit. Conversion costs are incurred evenly throughout the production cycle. Inspection takes place as units are placed into production. After​ inspection, some units are spoiled due to undetectable material defects. Spoiled units generally constitute​ 3% of the good units. Data provided for February 2017 are as​ follows:

​WIP, beginning inventory​ 2/1/2017	​51,200 units
Direct materials​ (100% complete)
Conversion costs​ (60% complete)
Started during February	​171,000 units
Completed and transferred out	​180,500 units
​WIP, ending inventory​ 2/28/2017	​26,300 units
Direct materials​ (100% complete)
Conversion costs​ (30% complete)
​Costs:
​ WIP, beginning​ inventory:
Direct materials	​$280,700
Conversion costs	​80,300
Direct materials added	​408,100
Conversion costs added	​264,900

What are the direct material and conversion costs of all the units that were initially in the beginning

workminus

inminus

process

inventory and were subsequently​ shipped? Take into account the costs related to the completion of the conversion of the units during the month. Use the FIFO method of process costing.​ (Round any cost per unit calculations to the nearest​ cent.)

Answer 1

A)	Statement of equivalent production for Blending Department					Degree of completion
						Direct Material			Conversion
a)	Particulars	Units	Particulars	Units		%	Units		%	Units
	Opening WIP	51200	Abnormal Loss (balance)	10270		100%	10270		100%	10270
	Material Introduced	171000	Normal Loss (171000 x 3%)	5130		0%	0		0%	0
			Transfer to next process:
			From O/p WIP	51200		0%	0		40%	20480
			From Current Intro	129300		100%	129300		100%	129300
			Closing WIP	26300		100%	26300		30%	7890
		222200		222200			165870			167940

Statement of cost per equivalent production
Element of costs	Units	Costs	Cost/eq. units
Direct Material	165870	$      408,100.00	$                  2.46
Conversion	167940	$      264,900.00	$                  1.58
			$                  4.04

B)	Statement of evaluation
	Cost of Finished Goods
	Existing cost of 51200 units =		$     361,000.00	($ 280700 + $ 80300)
	Cost of Completing 20480 units:
	Conversion cost =		$       32,304.11	( 20480 x $ 1.58)
	Cost of 129300 units =		$     522,075.85	(129300 x $ 4.04)
		Total	$     915,379.96
	Cost of closing WIP
		Units	Cost/eq. units	Costs
	Direct Material	26300	$                 2.46	$    64,707.48
	Conversion	7890	$                 1.58	$    12,445.28
			Total	$    77,152.77
	Cost of Abnormal Spoilage
		Units	Cost/eq. units	Costs
	Direct Material	10270	$                 2.46	$    25,267.90
	Conversion	10270	$                 1.58	$    16,199.37
			Total	$    41,467.28