Question

n calculating unit cost in a process costing system, "conversion cost" is defined as the sum of:

		Direct and indirect material costs.
		Direct and indirect labor costs.
		Direct labor and factory overhead costs.
		Indirect labor and factory overhead costs.
		Indirect material and factory overhead costs.

Units accounted for includes units completed and transferred out plus:

		Beginning inventory.
		Units to account for.
		Ending inventory.
		Units started.

Matrix Inc. calculates cost for an equivalent unit of production using both the weighted-average and the FIFO methods.

Data for July:
Work-in-process inventory, July 1 (36,000 units):
Direct materials (100% completed)	$122,400
Conversion (50% completed)	76,800
Balance in work in process inventory, July 1	$199,200
Units started during July	90,000
Units completed and transferred	102,000
Work-in-process inventory, July 31:
Direct materials (100% completed)	24,000
Conversion (50% completed)
Cost incurred during July:
Direct materials	$180,000
Conversion costs	288,000

The cost of goods completed and transferred out under the weighted-average method is calculated to be:

		$96,000.
		$476,400.
		$571,200.
		$484,000.
		$468,200.

Talamoto Co. manufactures a single product that goes through two processes — mixing and cooking. The following data pertains to the Mixing Department for September.

Work-in-process Inventory Sept. 1	28,000	units
Conversion complete	70%
Work-in-process inventory Sept. 30	16,000	units
Conversion complete	50%
Units started into production in Sept.	72,000
Units completed and transferred out	?	units
Costs
Work-in-process inventory Sept.1	$120,000
Material P	110,000
Material Q	165,000
Conversion
Costs added in September
Material P	$180,000
Material Q	165,000
Conversion	354,800

Material P is added at the beginning of work in the Mixing Department. Material Q is also added in the Mixing Department, but not until units of product are forty percent completed with regard to conversion. Conversion costs are incurred uniformly during the process.

Total equivalent units for Material P under the weighted-average method are calculated to be:

		100,000 equivalent units.
		92,000 equivalent units.
		84,000 equivalent units.
		72,000 equivalent units.
		68,000 equivalent units.

Answer 1

Question 1

Correct answer------ Direct labor and factory overhead costs.

Conversion cost is a sum of Direct labor cost and Overheads .

Overheads includes indirect material and indirect labor.

Question 2

Correct answer------ Ending inventory.

Question 3

Correct answer------ $571,200

Working

Statement of Equivalent Units
				Material		Conversion Cost
	Units			Complete %	Equivalent units	Complete %	Equivalent units
Transferred	1,02,000			100%	1,02,000	100%	1,02,000
Closing WIP	24,000			100%	24,000	50%	12,000
Total	1,26,000			Total	1,26,000	Total	1,14,000

Cost per Equivalent Units
COST		Material	Conversion Cost	TOTAL
Beginning WIP Inventory Cost		$         1,22,400	$        76,800	$         1,99,200
Cost incurred during period		$         1,80,000	$    2,88,000	$         4,68,000
Total Cost to be accounted for		$         3,02,400	$    3,64,800	$         6,67,200
Total Equivalent Units		1,26,000	1,14,000
Cost per Equivalent Units		$                 2.40	$             3.20

Statement of cost
Cost	Equivalent Cost/unit	Ending WIP		Transferred
		Units	Cost Allocated	Units	Cost Allocated
Material	$              2.40	24,000	$        57,600	$         1,02,000	$   2,44,800
Conversion Cost	$              3.20	12,000	$        38,400	$         1,02,000	$   3,26,400
TOTAL	$      6,67,200	TOTAL	$        96,000	TOTAL	$   5,71,200

Question 4

Correct answer------ 100,000 equivalent units.

Reconciliation of Units
A	Opening WIP	28,000
B	Introduced	72,000
C=A+B	TOTAL	1,00,000
D	Transferred	84,000
E=C-D	Closing WIP	16,000

Statement of Equivalent Units
				Material
	Units			Complete %	Equivalent units
Transferred	84,000			100%	84,000
Closing WIP	16,000			100%	16,000
Total	1,00,000			Total	1,00,000