Question

Question 3 (12 Marks) John Doe Company manufactures a product for which materials are added at the beginning of the manufacturing process. A review of the company's inventory and cost records for the most recently completed year revealed the following information: Units Materials Conversion $100,000 $157,500 100,000 500,000 Work in process, Jan 1 80% complete with respect to conversion costs Units started into production Costs added during the year Materials Conversion Units completed during the year $650,000 $997,500 450,000 The company uses the weighted average method in its process costing system. The ending inventory is 50% complete with respect to conversion costs. Required: a) Compute the equivalent units of production and the cost per equivalent units for materials and for conversion costs. (6 Marks) b) Determine the cost transferred to finished goods. (4 Marks) c) Determine the amount of cost that should be assigned to the ending work-in-process inventory. (2 Marks)

Answer 1

The answer has been presented in the supporting sheet. All the parts has been solved with detailed explanation and calculation. For detailed answer refer to the supporting sheet.

Answer 2 Part 1) Particular 5 Units completed and transferred 6 units in ending inventory 7 Equivalent units Statement of Equivalent units Physical Units % completion 450000 100 150000 100 600000 Material 450000 150000 600000 % completion 100 50 Conversion Cost 450000 75000 525000 Conversion Cost 525000 10 Particular Material 11 Equivalent units 600000 12 13 Cost Per Equivalent Units 14 Particular Material 15 cost in beginning work in process 100000 16 Cost incurred during the period 650000 17 Total cost 750000 18 No. of equivalent units 600000 19 Cost Per Equivalent Units 1.25 | Conversion Cost 157500 997500 1155000 525000 2.20 21 Particular 22 Cost Per Equivalent Units Material 1.25 Conversion Cost 2.2

24 Part 2) 25 Cost transferred tor finished department = cost per unit * units transferred out 26 = (1.25+2.2) * 450000 27 = $ 1552500 28 29 Thus the cost of transferred to finished department = $ 1552500 31 Part 3) 82 Cost of ending work in process $3 Material (1.25*150000) $4 Conversion Cost (2.2*75000) 15 Total cost of ending work in process 1,87,500 1,65,000 3,52,500 16 37 Thus the cost of ending inventory = $ 352500