Question

Smith Corp. began the current period with 9,000 units in process that were 100% complete as to materials and 40% complete as to conversion. Costs of $9,500 in direct materials and $8,700 in conversion costs were incurred in manufacturing those units in the previous period. Smith ended the the current period with 9,000 units and completed 5,000 units still in process. Work in Process was 100% complete as to materials and 60% complete as to conversion costs. Smith incurred $40,500 in direct materials costs, $6,000 in direct labor costs, and $25,000 in manufacturing overhead costs during the period.

Equivalent units for production of materials

Equivalent units for production of conversion

Cost per equivalent unit for materials

Cost per equivalent unit for conversion

Cost assigned to ending Work in Process Inventory

Cost assigned to good completed and transferred out   

Answer 1

Solution:

It is assumed that Smith Corp. uses weighted average cost method to determine cost assigned to Ending WIP and goods completed and transferred out.

Computation of Equivalent unit of Production
Particulars	Physical Units	Material	Conversion
Unit completed & Transferred out	9000	9000	9000
Closing WIP:	5000
Material (100%)		5000
Conversion (60%)			3000
Equivalent units of production	14000	14000	12000

Computation of Cost per equivalent unit of Production
Particulars	Material	Conversion
Opening WIP	$9,500.00	$8,700.00
Cost Added during May	$40,500.00	$31,000.00
Total cost to be accounted for	$50,000.00	$39,700.00
Equivalent units of production	14000	12000
Cost per Equivalent unit	$3.5714	$3.3083

Computation of Cost of ending WIP and units completed & transferred out
Particulars	Material	Conversion	Total
Equivalent unit of Ending WIP	5000	3000
Cost per equivalent unit	$3.5714	$3.3083
Cost of Ending WIP (Equivalent unit * Cost per equivalent unit)	$17,857	$9,925	$27,782
Units completed and transferred	9000	9000
Cost of units completed & Transferred (Unit completed * cost per equivalent unit)	$32,143	$29,775	$61,918