Question

The following data pertain to the Hercules Tire and Rubber Company for the month of May.

  

Work in process, May 1 (in units)		?
Units started during May		60,000
Total units to account for		75,000
Units completed and transferred out during May		?
Work in process, May 31 (in units)		10,000
Total equivalent units: direct material		75,000
Total equivalent units: conversion		?
Work in process, May 1: direct material	$	135,000
Work in process, May 1: conversion		?
Costs incurred during May: direct material		?
Costs incurred during May: conversion		832,250
Work in process, May 1: total cost		172,500
Total costs incurred during May		1,402,250
Total costs to account for		1,574,750
Cost per equivalent unit: direct material		9.40
Cost per equivalent unit: conversion		?
Total cost per equivalent unit		21.65
Cost of goods completed and transferred out during May		?
Cost remaining in ending work-in-process inventory: direct material		?
Cost remaining in ending work-in-process inventory: conversion		73,500
Total cost of May 31 work in process		167,500

Additional Information:

a. Direct material is added at the beginning of the production process, and conversion activity occurs uniformly throughout the process.

b. Hercules uses weighted-average process costing.

c. The May 1 work in process was 20 percent complete as to conversion.

d. The May 31 work in process was 60 percent complete as to conversion.

Required:

Compute the missing amounts, and prepare the firm’s May production report.

Answer 1

1) Calculation of Missing Amounts:

Work in process May 1, (in units) = Total Units to account for - UNits started during May

= 75,000 - 60,000

Work in process May 1, (in units) = 15,000

Units Completed and trasferred out during May = Total Equivalent Units: direct Material - Work in process, May 31

= 75,000 - 10,000

Units Completed and trasferred out during May = 65,000

Total Equivalent Units conversion = Units Completed and trasferred out during May + Work in process, May 31 * Percentage of completion

= 65,000 + (10,000 * 60%)

Total Equivalent Units conversion = 71,000

Work in process May 1, conversion = Work in process May 1, Total Cost - Work in process May1 , Direct Material

= $172,500 - $135,000

Work in process May 1, conversion = $37,500

Cost incurred during May : Direct Material = Total Costs incurred during MAy - Cost incurred during May Conversion

= $1,402,250 - $832,250

Cost incurred during May : Direct Material = $570,000

Cost per Equivalent Unit: Conversion = (Beginning Cost +Cost added) / Equivalent Units of Production

= ($37,500 + $832,250) / 71,000

Cost per Equivalent Unit: Conversion = $12.25

(or)

Cost per Equivalent Unit: Conversion = Total Cost per Equivalent Unit - Cost per Equivalent Unit: Direct Material

= $21.65 - $9.40

Cost per Equivalent Unit: Conversion = $12.25

Cost of Goods completed and transferred during may = Units Completed and trasferred out during May * Total cost per Equivalent Unit

= 65,000 * $21.65

Cost of Goods completed and transferred during may = $1,407,250

Cost remaining in ending work in process inventory: Direct Material = Work in process May 31 units * Cost per Equivalent Unit : Direct Material

= 10,000 * $9.40

Cost remaining in ending work in process inventory: Direct Material = $94,000

2)

Particulars	units	Direct Material	Conversion
Units completed and transferred out	65000	65000	65000
Work in Process, May 31	10000	10000	6000
Total units accounted for	75000
Total Equivalent units		75000	71000
Particulars	Direct Material	Conversion	Total
Work in Process, May 1	$              135,000	$                  37,500	$             172,500
Costs incurred during May	$              570,000	$                832,250	$          1,402,250
Total Costs to account for	$              705,000	$                869,750	$          1,574,750
Equivalent units	75000	71000
Cost per Equivalent unit	$                     9.40	$                    12.25
Particulars	No of Equivalent units	Cost per Equivalent units	Total Cost
Cost of goods completed and transferred	65000	$                    21.65	$          1,407,250
Cost remaining in May 31 work in process
Direct Material	10000	$                       9.40	$                94,000
Conversion	6000	$                    12.25	$                73,500
Total Cost of May 31, work in process			$             167,500