Question

MGT 5 - MANAGERIAL ACCOUNTING PROBLEM 7 GIVEN BEGINNING UNITS UNITS STARTED ENDING UNITS 6,800 24,200 3,700 DM = 100% CC = 45% DM 45,000 27,450 187,500 152,133 CC BEGINNING COSTS CURRENT COSTS REQUIRED COMPLETE PROCESS COSTING STEPS 1-4: (WEIGHTED AVG.) BEG START ACCT FOR END T.O. 6,800 24,200 31,000 (3,700) 27,300 EU COSTS BEG CURRENT TOTAL EU $/EU END WIP T.O. DM 3,700 27,300 31,000 DM 45,000 187,500 232,500 31,000 7.50 27,750 204.750 232,500 CC 1,665 27,300 28,965 CC 27,450 152.133 179,583 28,965 6.20 10,323 169 260 179,583

can someone please explain this problem in detail?step by step?

Answer 1

1]	The first step is to layout the units to be accounted for. There were 6800 units in the beginning
	WIP and units added are 24200, making it a total of 31,000 units. These units are whole units in
	that the extent of processing done is not highlighted. These are shown below:
	Work in process, Beginning			6800
	Units added during the period			24200
	Total units to be accounted for			31000
2]	The next step is to find how the above units have been processed. That is how many units have been
	processed fully and how many are partly processed [ending WIP units]. Here, the completed units
	are 27300 [31000-3700].
	On the right hand side, the EUP are calculated, that is whether the processing is complete or if not,
	how much proportion of the units are completed. In other words, in respect of partially completed
	units , what is the equivalent in terms of completed units. This is separately calculated for
	material and conversion costs.
	Here, weighted average method is used, which, assumes that the beginning WIP units [6800] have been
	completed fully in this period [the % completed in the previous period is ignored]. Thus, the total units
	completed during the period = 27300 [which includes the beginning WIP of 6800 units]. These would
	have an EUP for materials and conversion of 27300 Units.
	With respect to the beginning WIP, it is 100% complete with respect to materials and 45% complete
	with respect to conversion costs. Hence, EUP for ending WIP is 3700 & 1665.
	Units to be assigned costs:
			Equivalent Units of Production [EUP]
		Whole Units	Direct Materials	Conversion
	Units completed during the period	27300	27300	27300
	Ending, work in process	3700	3700	1665
	Total units to be assigned costs	31000	31000	28965
3]	Cost Information:
	The next step is to accumulate the total costs incurred, which includes the cost of the beginning WIP.
	After that, the cost per equivalent unit is calculated by dividing the total cost accumulated with the EUP
	separately for Materials and conversion cost.
	Cost per equivalent unit:
			Direct Materials	Conversion	Total Cost
	Beginning working in process		$          45,000	$          27,450	$             72,450
	Costs added during the month		$      1,87,500	$      1,52,133	$          3,39,633
	Total costs to be accounted for		$      2,32,500	$      1,79,583	$          4,12,083
	Total equivalent units		31000	28965
	Cost per equivalent unit		$            7.50	$             6.20
	Costs assigned to production:
4]	The final step is to assign costs separately for units completed and ending WIP, with break up for materials
	and conversion costs. This is done below:
			Direct Materials	Conversion	Total
	Cost of units completed and transferred		$      2,04,750	$      1,69,260	$          3,74,010
			[27300*7.5]	[27300*6.2]
	Ending work in process inventory		$         27,750	$         10,323	$             38,073
			[3700*7.5]	[1665*6.2]
	Total costs assigned		$      2,32,500	$      1,79,583	$          4,12,083
5]	The total costs to be accounted for and the total costs accounted for should agree.