Question

2. Assurer, Inc. used the weighted-average method in its process costing system. At the beginning of July, Assurer, Inc had the following Beginning Balances in its Accounts: Raw Materials $ 4,200 WIP Department #1 DM $ 800 DL 1,200 FOH 900 WIP Department #2 DM $ 3,900 DL 1,800 POH 2,000 All materials are added at the beginning of each process in each department. There were 6,000 units in the beginning WIP for Department #1 and 1,200 units in Department #2's beginning WIP. Finished Goods had a zero balance. During July, 4,600 units were placed into production in Department #1. CC 50% 35% Ending WIP for Department #1 Ending WIP for Department #2 Note: Since All Materials added at the beginning of each process means that Materials are immediately 100% complete The following transactions took place in July for Department #1: 1. During the month, $3,000 of raw materials were purchased on account. Direct materials issued to Dept #1 were $2,062. Direct factory labor used in Dept #1 was $3,628. $7,000 for labor was paid to workers. FOH was applied at $10 per a MH. Actual MH used in Dept #1 were 560. Transferred 7,100 units from Dept #1 to Dept #2. Actual FOH used in Dept #1 on account was $5,250. 2. 3 4 5 6 7 A) What are the equivalent units of production for Department #1? Hint: To solve for Equivalent you have to first calculate ending WIP like you did in problem #1 B) What is the cost per unit of those goods transferred to Department #2?

Answer 1

A) Equivalent units of production Dept 1 Materials 10,600 Conversion 8,850 see cost of production report below B) Materials Conversion Total cost $0.27 $1.28 $1.55 Answer Cost per equivalent unit C) Factory overheads is over-applied FOH applied to work in process Actual manufacturing overheads Over-applied factory overheads $5,600 $5,250 $350 D) The over-applied FOH is adjusted in Cost of goods sold. It has impact of $350 by reducing cost of goods sold So profit will increase T- Account Manufacturing overhead account $5,250 Work in process Dept 1 Accounts payable $5,600 End bal. $350 Working notes: Assurer Inc. Department 1 Production Cost Report-Weighted Average Cost Method For the Month of April Equivalent Units Whole Direct Conversion Flow of units Units Completed Materials Completed Costs Units to account for: Beginning WIP Inventory 6,000 Units started during the month 4,600 Total Units to account for 10,600 Units accounted for: Units competed and transferred out 7,100 100% 7,100 100% Units in Ending WIP Inventory 3,500 100% 3,500 50% 1,750 Total Units accounted for 10,600 Equivalent units of production 10,600 8,850 7,100 COSTS Direct Materials Conversion Costs Total Costs Costs to account for: Cost from Beginning WIP Inventory Cost added during period Total cost to account for $800 $2,062 $2,862 $2,100 $9,228 $11,328 $2,900 $11,290 $14,190 Divided by Equivalent units Cost per Equivalent unit 10,600 $0.27 8,850 $1.28 $1.55 Conversion cost working Labor Overheads Conversion $3,628 $5,600 (560"$10) $9,228