Question

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Tamar Co. manufactures a single product in two departments. All direct materials are added at the beginning of the Forming process. Conversion costs are added evenly throughout the process. During May, the Forming department started 29,250 units and transferred 30,700 units of product to the Assembly department. Its 4,700 units of beginning work in process consisted of $21,500 of direct materials and $298,440 of conversion costs. It has 3,250 units (100% complete with respect to direct materials and 80% complete with respect to conversion) in process at month-end. During the month, $521,700 of direct materials costs and $3,031,560 of conversion costs were charged to the Forming department.

1. Prepare the company's process cost summary for May using the weighted average method. Total costs to account for: Cost of beginning work in process Costs incurred this period Total costs to account for: Total costs accounted for Difference due to rounding cost/unit 0 Unit reconciliation: Units to account for: Beginning work in process inventory - units Units started this period Total units to account for Total units accounted for: Units completed and transferred out Ending work in process - units Total units accounted for Equivalent units of production (EUP)- weighted average method Units % Materials EUP- Materials % Conversion EUP- Conversion Materials Conversion Units completed and transferred out Ending work in process - units Total units Cost per equivalent unit of production Cost of beginning work in process Costs incurred this period Total costs + Equivalent units of production Cost per equivalent unit of production Total costs accounted for: Costs EUP Costs EUP Cost of units transferred out: EUP Cost per Cost per Total cost EUP Direct materials Conversion Total costs transferred out Costs of ending work in process EUP Total cost Cost per EUP $ 0.00 $ 0.00 0 0 Direct materials Conversion Total cost of ending work in process Total costs accounted for

Answer 1

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, $319,940 ($21500 + $298440] $3,553,260 ($521700 + $3031560] $3,873,200 $3,873,200 [$3561200 + $312000] $0 ($3873200 - $3873200] Total costs to account for: Cost of beginning work in process Costs incurred this period Total costs to account for: Total costs accounted for Difference due to rounding cost/unit Unit reconciliation: Units to account for: Beginning work in process units Units started this period Total units to account for Units accounted for: Units completed and transferred out Ending work in process units Total units accounted for 4,700 29,250 33,950 30,700 3,250 33,950

EUP - Weighted Average Method Whole Units Completed and transferred Ending work in process Equivalent Units of Production (EUP) 30,700 3,250 33,950 Materials 100% 100% EUP- Materials 30,700 3,250 33,950 % EUP- Conversion Materials 100% 30,700 80% 2,600 33,300 [30700 units x 100%; 30700 units x 100%] [3250 units x 100%; 3250 units x 80%] 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 Cost per Equivalent units of Production Materials $21,500 $521,700 $543,200 33,950 $16 Conversion $298,440 $3,031,560 $3,330,000 33,300 [As computed EUP schedule presented above] $100 ($543200 / 33950 units = $16; $3330000 / 33300 units = $100] Total costs accounted for: Cost of units transferred out EUP Totals Cost per EUP $16 $100 Materials Conversion Total Costs Transferred Out 30,700 30,700 $491,200 [30700 units x $16] $3,070,000 [30700 units x $100] $3,561,200

Cost of ending work-in-process EUP Totals Cost per EUP $16.00 $100.00 Materials Conversion Total cost of ending work-in-process 3,250 2,600 $52,000 $260,000 $312,000 [3250 units x $16] [2600 units x $100] Total Costs Accounted For: $3,873,200 [$3561200 + $312000]