Question

Stefan Ceramics is in the business of selling ceramic vases. It has two departments – molding and finishing. Molding department purchases tungsten carbide and produces ceramic vases out of it. Ceramic Vases are then transferred to finishing department, which designs it as per the requirement of the customers.

During the month of July, molding department purchased 500 kgs of tungsten carbide at $60 per kg. It started manufacture of 4,000 vases and completed and transferred 3,200 vases during the month. It has 800 vases in the process at the end of the month. It incurred direct labor charges of $1,000 and other manufacturing costs of $500, which included electricity costs of $200. Stefan had no inventory of tungsten carbide at the end of the month. It also had no beginning inventory of vases. The ending inventory was 50% complete in respect of conversion costs.

6. What is the total conversion costs for the month of July?

A) $1,700

B) $1,500

C) $1,300

D) $1,000

7. What is the cost of tungsten carbide that will be assigned to vases finished and transferred to the finishing department for the month of July?

A) $30,000

B) $28,000

C) $26,000

D) $24,000

8. What are the equivalent units used to calculate conversion costs transferred out and in ending inventory?

A) 4,000

B) 3,200

C) 3,600

D) 4,400

9.   What is the total of the conversion costs that will be assigned to the ending WIP inventory?

A) $1,700

B) $1,333

C) $1,500

D) $166

Answer 1

Total Conversion cost:
Labor cost		1000
Other mnaufacturing cost	500
Total Conversion cost:	1500
UNITS TO ACCOUNT FOR:
Beginning Work in Process units			0
Add: Units Started in Process			4,000
Total Units to account for:			4,000
UNITS TO BE ACCOUNTED FOR:
Units completed and transferred out		3,200
Ending Work in Process			8,000
Total Units to be accounted for:		42,900
Equivalent Units:
			UNITS	Material Cost	Conversion
				% Completion	Units	% Completion	Units
Units complted		3200	100%	3,200	100%	3,200
Ending Work in Process	800	100%	800	50%	400
Total Equivalent units	4000		4,000		3,600
TOTAL COST TO ACCOUNT FOR:
				Material		Conversion
Beginning work in Process		0		0
Cost Added during May		30,000		1,500
Total Cost to account for:		30,000		1,500
Equivalent Units			3,600		3,600
Cost per Equivalent unit		8.333333		0.4167
TOTAL COST ACCOUNTED FOR:
Units completed and Transferred out (3200 units)
				Equivalent unit	Cost per EU	Total Cost
Material				3,200	8.33	26656
Conversion Cost			3,200	0.4167	1333.44
Total Cost of Units completed and transferred out:		27989.44
Ending Work in process (800 units)
				Equivalent unit	Cost per EU	Total Cost
Material				800	8.33	6664
Conversison Cost			400	0.4167	166.68
Total cost of Ending Work in process:			6,831
Q6.
Answer is B. $1500.
Q7.
Answer is B. $28,000
Q8.
Answer is c. 3600.
Q9
Answer is D. $166.