Question

Arsenio Company manufactures a single product that goes through two processes, mixing and cooking. The following data pertain to the mixing department for August: 29,000 units 32,000 units 71,000 Work-in-process inventory, August 1 Conversion: 80% complete Work-in-process inventory, August 31 Conversion: 50% complete Units started Units completed and transferred out Costs Work-in-process inventory, August 1 Material x Material y Conversion Costs added during August Material X Material y Conversion $ 55,300 85,600 118,880 159, 200 104,800 334,720 Material X is added at the beginning of work in the mixing department. Material Y is also added in the mixing department, but not until units are 60% complete with regard to conversion. Conversion costs are incurred uniformly during the process. The company uses the weighted-average cost method. Required: 1. & 2. Calculate the equivalent units and costs per equivalent unit of material X, material Y, and conversion for the mixing department. 3. Calculate the cost of units transferred out. 4. Calculate the cost of the ending Work-in-Process Inventory.

Answer 1

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, Physical units of production: Units in beginning inventory Add: Units started during current period Less: Units in ending inventory Units completed and transferred out 29,000 71,000 32,000 68,000 % Particulars Completed and transferred Ending work in process Equivalent Units of Production (EUP) Whole Units 68,000 32,000 100,000 EUP- Material-x Material-X 100% 68,000 100% 32,000 100,000 EUP- Material-Y | Material-Y 100% 68,000 0% 68,000 % EUP- Conversion Conversion 100% 68,000 50% 16,000 84,000 [68000 x 100%; 68000 x 100%; 68000 x 100%] [32000 x 0%; 32000 x 50%; 32000 x 50%] NOTE: As Material-X is added at the beginning itself, its % of completion in ending WIP is 100% whereas Material-Y is added after 60% of process only and so its % of completion is 0%.

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 Material-x $55,300 $159,200 $214,500 100,000 $2.15 Material-Y Conversion $85,600 | $118,880 $104,800 $334,720 $190,400 | $453,600 68,000 84,000 $2.80 $5.40 [As computed EUP schedule presented above] [$214500 / 100000 = $2.145; $190400 / 68000 = $2.8; $453600 / 84000 = $5.4] Cost of goods completed & transferred EUP Totals NOTE: Material- Material-Y Conversion Total Cost of goods completed & transferred 68,000 68,000 68,000 Cost per EUP $2.145 $2.800 $5.400 $145,860 $190,400 $367,200 $703,460 [68000 units x $2.145] [68000 units x $2.8] [68000 units x $5.4] For reporting purpose, cost per equivalent unit is rounded off to 2 decimal places. But, for the calculation of cost of goods comleted and ending WIP, actual cost per equivalent unit without rounding- -off are taken, as per instruction given in the question. Cost of ending work-in-process EUP Totals 32,000 Material-x Material-Y Conversion Total Cost of goods in ending work in process Cost per EUP $2.145 $2.800 $5.400 $68,640 $0 $86,400 $ 155,040 [32000 units x $2.145] [o units x $2.8] [16000 units x $5.4] 16,000