Question

The me EM2.5 wanag ontre ustif QUESTION 4 Merah Sinap Sdn Bhd (MSSB) produces unique syrup using cane sugar and local het nup is sold in small bottles and is prired as favoring for drinks and we in dessert The bottles are sold at RM12 each. The first stage in the production is carried out in the Mixing them in the Department, which removes foreign matter from the raw materials and mix proper proportions in large vats. The company uses the weighted average method in process costing system. A hastily prepared report for the Mixing Department for January appears below RM Units to be accounted for: 30,000 Work In Process, 1 January: Material 90% complete; Conversion 80% complete 200,000 Started into production 230,000 Total unis to be accounted for Brie Units accounted for as follows: Transferred to next department Work In Process, 31 January: Materials 74% complete, Conversion 60% complete Total units accounted for 190,000 40,000 230,000 Cost Reconciliation Cost to be accounted for Work in Process, 1 January Cost added during the month Total cost accounted for 98,000 827,000 925,000 Cost accounted for as follows: 119,400 Work In Process, 30 January 805,000 Transferred to next department 925,000 Total cost accounted for The beginning inventory consisted of the following cost: materials RM67,800, and the conversion cost RM30,200. Cost added during the month consisted of materials RM579,000, and conversion cost RM248,000. Management is interested on some information about MSSB's operation. Required: a) Compute the equivalent units for the month (6 marks) b) Compute the costs per equivalent unit for the month (8 marks) c) Compute the units started and completed for the month (3 marks)

Answer 1

a) Under weighted average method, equivalent units are to be calculated only for units completed & transferred out and units lying as ending work in process as it is assumed that the units once entered into the process become integral part of total units and no segregation between units transferred from beginning work in process and introduced during current process. Conversion cost includes Labor + Overheads. So, % Particulars Whole Units EUP- Materials % EUP- Conversion Conversion Materials Completed and transferred Ending work in process Equivalent Units of Production (EUP) 190,000 40,000 230,000 100% 74% 190,000 29,600 219,600 100% 60% 190,000 24,000 214,000 [190000 units x 100%; 190000 units x 100%] |[40000 units x 74%; 40000 units x 60%] b) Cost per equivalent units of production Cost of beginning work in process Cost added during the period Total Materials Costs & Conversion Costs Divided by Equivalent units of Production (EUP) Cost per Equivalent units of Production Materials Conversion RM 67,800 RM 30,200 RM 579,000 RM 248,000 RM 646,800 RM 278,200 219,600 214,000 [As computed EUP schedule presented above] RM 2.9454 RM 1.3000 (RM 646800/219600 units = RM 2.9454; RM 278200 / 214000 units = RM 1.3000]

c) Physical units of production: Units completed and transferred out Less: Units in beginning inventory Units started & completed during current period 190,000 -30,000 160,000