Question

Requested Review Problems ZMT Books is a publishing company with 2 processes, the printing and binding departments. After pages are printed in the printing department, the printed pages are transferred to the binding department where the pages are bound into finished books. In the binding process, direct materials are added when the book is 80% complete and conversion costs are added uniformly throughout the process. The following information is for the binding department for the past month. Beginning works in process in the binding department consists of 900 books that are 40% complete with transferred in costs of $32,775 and conversion costs of $15,000. During the previous month the company transferred in 2,700 books into the binding process from the printing process with a cost of $144,000. At the end of the month there were 600 books that were 60% complete in the ending works in process for the binding department. During the month, the binding department incurred direct material costs of $26.700 and conversion costs of $69,000. How much cost is transferred out of the binding process? How much cost is left in ending works in process of the binding department?

Answer 1

Under FIFO method, equivalent units would consist efforts required to complete the beginning inventory, efforts put for completed and transferred out goods and ending inventory. As the materials are introduced after 80% of completion, beginning inventory is 0% complete in terms of materials, 100% efforts would be required in current process or period whereas conversion costs would require the uncompleted portion of costs in current process or period. That is, it was complete 40% already and so 60% efforts would be required in current period. Books in beginning inventory Add: Number of books transferred in Less: Books in ending inventory Books completed and transferred out 900 2,700 (600) 3,000 --> Of which 900 units shall be from beg. inventory; Bal. 2100 units from current. Equivalent Units of Production (EUP) Particulars Whole Units Materials 100% 100% 900 2,100 3,000 Beginning work in process Started, Completed and transferred Transferred to next process Ending work in process Equivalent Units of Production (EUP) FUP. % EUP- Materials Conversion Conversion 900 60% 540 2,100 100% 2,100 3,000 2,640 60% 1,800 3,000 4,440 [900 units x 100%; 900 units x 60%] [2100 units x 100%; 2100 units x 100%] 3,000 0% [3000 units x 0%; 3000 units x 60%] 6,000 NOTE: As all the materials are added after 80% completion of the process, ending work in process inventory shall consist of 0% of materials in EUP calculation.

Cost per equivalent units of production Materials Conversion [Under FIFO method, it shall not be considered here) [Materials = $144,000 + $26,700] Cost of beginning work in process Cost added during the month Total Materials Costs & Conversion Costs Equivalent units of Production (EUP) Cost per Equivalent units of Production $170,700 $170,700 3,000 $56.90 $69,000 $69,000 4,440 $15.541 [As computed EUP schedule presented above) ($170700 / 3000 units = $56.90; $69000 / 4440 units = $15.541] EUP Cost per EUP Totals Cost of goods completed & transferred Materials - Beginning cost Conversion - Beginning Cost Cost of goods completed & trfd from beginning [Given] $32,775 $15,000 $47,775 3,000 2,640 $56.900 $15.541 Materials - Current Cost Conversion - Current Cost Cost of goods completed & trfd from current Total Cost of goods completed & transferred $170,700 [3000 units x $56.90] $41,027 [2640 units x $15.541] $211,727 | $259,502_[$47775 + $211727]

Cost of ending work-in-process EUP Totals Cost per EUP $56.90 $15.54 0 Materials Conversion Total cost of ending work-in-process $0 $27,973 $27,973 [0 units x $56.90] [1800 units x $15.541] 1,800