Question

Fedora, Inc, uses a weighted-average process-costing system and has one production department. All materials are introduced at the start of manufacturing; in contrast, conversion cost is incurred uniformly throughout production. The company had respective work-in-process inventories on May 1 and May 31 of 62,500 units and 72,500 units, the latter of which was 50% complete. The production supervisor noted that Fedora completed 100,000 units during the month.

Costs in the May 1 work-in-process inventory were subdivided as follows: materials, $42,500; conversion, $95,000. During May, Fedora charged production with $388,750 of material and $760,000 of conversion, resulting in a material cost per equivalent unit of $2.50.

Required:

1. Determine the number of units that Fedora started during May.
2. Compute the number of equivalent units with respect to conversion cost.
3. Determine the conversion cost per equivalent unit. (Round your final answers to two decimal places.)
4. Compute the cost of the May 31 work-in-process inventory. (Round your intermediate calculations to 2 decimal places and final answers to nearest whole dollar.)
5. What account would have been credited to record Fedora's completed production?

Answer 1

Answers

• Requirement [A]
  No of units started = 110,000 units

Units Reconciliation
Units to account for:
Beginning WIP	62,500
Units started this period	110,000 [172500 – 62500]
Total Units to account for	172,500
Total Units accounted for:
Completed & Transferred out	100,000
Ending WIP	72,500
Total Units accounted for	172,500

• Requirement [B]
  Equivalent units for conversion cost = 136,250 units

EUP - Weighted Average Method	Units	% Material	EUP Materials	% Conversion	EUP - Conversion
Units TRANSFERRED	100,000	100%	100,000	100%	100,000
Units of ENDING WIP	72,500	100%	72,500	50%	36,250
Equivalent Units of Production			172,500		136,250 ANSWER

• Requirement [C]
  Cost per equivalent unit for conversion cost = $ 6.28 per EU

COST per EUP	Conversion
Cost of Beginning WIP	$                                  95,000.00
Cost incurred during the period	$                                760,000.00
Total Costs	$                                855,000.00
Equivalent units of production	136,250
Cost per EUP	$                                      6.27523 or $ 6.28

• Requirement [D]

Cost of ending WIP Inventory = $ 408,900

Cost of ending WIP	EUP	Cost per EUP	Total Cost
- Direct Materials	72,500	$                      2.50	$        181,250.00
- Conversion	36,250	$                      6.28	$        227,650.00
Total cost of ending WIP				$            408,900.00

• Requirement [E]

--Work in Process Inventory must have been credited. [Finished goods inventory is debited]