Question

In: Accounting

At the end of the month, Michael Company calculated equivalent units of production in the Packaging Department as shown below:

Ascertaining the cost of equivalent units using Weighted Average costing.

 At the end of the month, Michael Company calculated equivalent units of production in the Packaging Department as shown below:

 

Solutions

Expert Solution

The Direct Material Cost of $8 and the Conversion Cost of $9 is applied to the number of Equivalent units for both Completed & Transferred Units and the Ending WIP Units.

Cost of Ending WIP = (Equivalent Units for DM x Unit DM Cost) + (Equivalent units for Conv Cost x Conv Cost per unit)
                                 = (5000 x $8) + (3000 x $9)
                                 = $67,000

 

Cost of Completed & Transferred Units = (Equivalent Units for DM x Unit DM Cost) + (Equivalent units for Conv Cost x Conv Cost per unit)
                                                                = (51000 x $8) + (51000 x $9)
                                                                = $867,000


Cost of ending WIP Inventory: $67,000
 
Cost of units completed and transferred out: $867,000

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