Question

In: Accounting

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:

a.

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

b.

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

c.

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

d.

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:

a.

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

b.

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

c.

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

d.

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 2 years ago
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