During July, the following costs were incurred: Materials (30,000 units) $24,900 Labour and overheads $20,075 At...

During July, the following costs were incurred:
Materials (30,000 units) $24,900
Labour and overheads $20,075
At the beginning of July, there were 15,000 units of work in progress valued as follows:
Materials (100% complete) $9,000
Labour and overheads (40% complete) $1,250
At the end of July, there were 5,000 units of work-in-progress. They were 100% complete for materials
and 50% complete for labour and overheads.
Using both FIFO approach and Weighted Average approach:
(a) calculate how many units were completed during July
(b) calculate the cost per unit
(c) value the finished items and the closing work-in-progress
(d) prepare a Process Account. (Note: assume no losses)

Solutions

Expert Solution

Solution - FIFO Approach:

Computation of Equivalent unit (FIFO)
Particulars	Physical units	Material	Conversion
Units to be accounted for:
Beginning WIP Inventory	15000
Units started this period	30000
Total unit to be accounted for	45000
Units Accounted for:
Units completed and transferred out
From beginning inventory Material - 0% Conversion - 60%	15000	0	9000
Started and completed currently	25000	25000	25000
Units in ending WIP Material - 100% Conversion - 50%	5000	5000	2500
Total units accounted for	45000	30000	36500

Computation of Cost per Equivalent unit
Particulars	Total cost	Material	Conversion
Current period cost	$44,975.00	$24,900.00	$20,075.00
Equivalent units		30000	36500
Cost per equivalent unit		$0.83	$0.55

Producton cost report - FIFO
Particulars	Total cost	Material	Conversion
Cost Accounted for :
Cost assigned to unit transferred out:
Cost from beginning WIP Inventory	$10,250	$9,000	$1,250
Current cost added to complete beginning WIP:
Material	$0	$0
Conversion (9000 * $0.55)	$4,950		$4,950
Total Cost from beginning inventory	$15,200	$9,000	$6,200

Current cost of unit started and completed:

Material (25000*$0.83)	$20,750	$20,750
Conversion (25000*$0.55)	$13,750		$13,750
Total cost of unit started and completed	$34,500	$20,750	$13,750

Total cost of unit transferred out	$49,700	$29,750	$19,950

Cost assigned to ending WIP:

Material (5000*$0.83)	$4,150	$4,150
Conversion (2500*$0.55)	$1,375		$1,375
Total ending WIP inventory	$5,525	$4,150	$1,375

Total cost accounted for	$55,225	$33,900	$21,325

Value of finished items = $49,700

Value of closing WIP = $5,525

Work In Process Accounts
Particulars	Debit	Particulars	Credit
Beginning balance	$10,250.00	Completed units	$49,700.00
Direct material	$24,900.00	Ending balance	$5,525.00
Labor and overhead	$20,075.00

Total	$55,225.00	Total	$55,225.00

Solution - Weighted Average Approach:

Computation of Equivalent unit of Production - Weighted Average
Particulars	Physical Units	Material	Conversion (Labor + Overhead)
Unit completed & Transferred out	40000	40000	40000
Closing WIP:	5000
Material (100%)		5000
Conversion (50%)			2500

Equivalent units of production	45000	45000	42500

Computation of Cost per equivalent unit of Production - Weighted Average
Particulars	Material	Conversion (Labor + Overhead)
Opening WIP	$9,000.00	$1,250.00
Cost Added during period	$24,900.00	$20,075.00

Total cost to be accounted for	$33,900.00	$21,325.00
Equivalent units of production	45000	42500
Cost per Equivalent unit	$0.7533	$0.5018

Computation of Cost of ending WIP and units completed & transferred out - Weighted Average
Particulars	Material	Conversion (Labor + Overhead)	Total
Equivalent unit of Ending WIP	5000	2500
Cost per equivalent unit	$0.7533	$0.5018
Cost of Ending WIP (Equivalent unit * Cost per equivalent unit)	$3,767	$1,254	$5,021
Units completed and transferred	40000	40000
Cost of units completed & Transferred (Unit completed * cost per equivalent unit)	$30,133	$20,071	$50,204

Value of finished items = $50,204

Value of closing WIP = $5,021

Work In Process Accounts
Particulars	Debit	Particulars	Credit
Beginning balance	$10,250.00	Completed units	$50,204.00
Direct material	$24,900.00	Ending balance	$5,021.00
Labor and overhead	$20,075.00

Total	$55,225.00	Total	$55,225.00

ekkarill92 answered 8 months ago

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