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 |
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