Question

A company that makes baseball gloves produces them using 2 production departments. When the gloves are produced they first go through the Fabrication Department, which produces the pieces that are later assembled into a glove. After the Fabrication Department completes its work on the glove, the glove goes to the Assembly Department to finish putting the glove together.

The following data is for the Fabrication Department for the month of June:

Units in the beginning work-in-process inventory                              5,000

Units started during the month                                                           40,000

Units completed during the month and transferred out                37,500

Units in the ending work-in-process inventory                                  7,500

Units in the ending work-in-process inventory are 80% completed in terms of direct materials and 30% completed in terms of conversion costs  

Costs in the beginning work-in-process inventory - $11,000 of direct materials costs and $8,750 of conversion costs

Costs incurred in the month of June - $250,000 of direct materials costs and $190,000 of conversion costs

Please complete the 5 steps of involved in process costing:

1. Show that Units in the beginning work-in-process inventory + Units started during the month = Units completed during the month + Units in the ending work-in-process inventory
2. Calculate the number of equivalent units in terms of direct materials and conversion costs
3. Calculate the amounts spent on direct materials and conversion costs
4. Calculate the cost per equivalent unit for direct materials and conversion costs
5. Allocate the total amount spent between the cost of goods completed (transferred out) and the cost assigned to the ending work-in-process inventory

Answer 1

1.

Unit Information
Units to account for :		Units accounted for :
Beginning work in process	5,000	Completed and transferred out	37,500
Units started this period	40,000	Ending work in process	7,500
Total units to account for	45,000	Total units accounted for	45,000

2.

Equivalent Units of Production (EUP)	Direct Materials	Conversion
Units completed and transferred out (37,500 X 100%)	37,500 EUP	37,500 EUP
Units of ending work in process
Direct materials (7,500 X 80%)	6,000 EUP
Conversion (7,500 X 30%)		2,250 EUP
Equivalent units of production	43,500 EUP	39,750 EUP

3.

	Direct Materials	Conversion
Costs of beginning work in process	$11,000	$8,750
Costs incurred this period	250,000	190,000
Total costs	$261,000	$198,750

4.

Cost per EUP	Direct Materials	Conversion
Total costs	$261,000	$198,750
÷ EUP	43,500 EUP	39,750 EUP
Cost per EUP	$6 per EUP	$5 per EUP

5.

Cost Assignment
Costs transferred out
Direct materials (37,500 EUP X $6 per EUP)	$225,000
Conversion (37,500 EUP X $5 per EUP)	187,500	$412,500
Costs of ending work in process
Direct materials (6,000 X $6 per EUP)	$36,000
Conversion (2,250 X $5 per EUP)	11,250	$47,250
Total costs accounted for		$459,750