Question

Victory Company uses weighted-average process costing to account for its production costs. Direct labor is added evenly throughout the process. Direct materials are added at the beginning of the process. During November, the company transferred 700,000 units of product to finished goods. At the end of November, the goods in process inventory consist of 180,000 units that are 30% complete with respect to labor. Beginning inventory had $420,000 of direct materials and $139,000 of direct labor costs. The direct material cost added in November is $2,220,000, and the direct labor cost added is $3,254,000. Required: Determine the equivalent units of production with respect to (a) direct labor and (b) direct materials. Compute both the direct labor cost and the direct materials cost per equivalent unit. Compute both direct labor cost and direct materials cost assigned to (a) units completed and transferred out and (b) ending goods in process inventory. Type your responses in a Word document or Excel spreadsheet and upload it to the Week 6 Assignments page.

Answer 1

Solution:

Computation of Equivalent unit of Production
Particulars	Physical Units	Material	Direct Labor
Unit completed & Transferred out	700000	700000	700000
Closing WIP:	180000
Material (100%)		180000
Conversion (30%)			54000
Equivalent units of production	880000	880000	754000

Computation of Cost per equivalent unit of Production
Particulars	Material	Direct Labor
Opening WIP	$420,000.00	$139,000.00
Cost Added during November	$2,220,000.00	$3,254,000.00
Total cost to be accounted for	$2,640,000.00	$3,393,000.00
Equivalent units of production	880000	754000
Cost per Equivalent unit	$3.00	$4.50

Computation of Cost of ending WIP and units completed & transferred out
Particulars	Material	Direct Labor	Total
Equivalent unit of Ending WIP	180000	54000
Cost per equivalent unit	$3.00	$4.50
Cost of Ending WIP (Equivalent unit * Cost per equivalent unit)	$540,000	$243,000	$783,000
Units completed and transferred	700000	700000
Cost of units completed & Transferred (Unit completed * cost per equivalent unit)	$2,100,000	$3,150,000	$5,250,000