Question

Exercise 4-3B: Equivalents Units and Product Cost Report - Weighted Average Method In its first month's operations (May 2016), Allred Company's Department 1 incurred charges of $72,000 for direct materials (9,000 units), $38,700 for direct labor, and $13,500 for manufacturing overhead. At month end, 8,500 units had been finished and transferred out. The remaining units were finished with respect to materials but only 40% complete with respect to conversion costs. Assuming Alfred uses the weighted average method and that materials are added at the beginning of the process and conversion costs occur evenly, compute the following: a. The equivalent units of materials and conversion costs. b. The cost per equivalent unit of materials and conversion costs. c. The total cost assigned to the units transferred out. d. The total cost assigned to the ending inventory. e. Prove that your results to requirement (c) and (d) sum to the total costs to be accounted for.

Answer 1

Answer :

(a) Computation of Equivalent unit of material and conversion cost

	Material	Conversion
Units finished and transferred out	8500	8500
Work in process inventory	500	200(500*40%)
Equivalent unit	9000	8700

(b) Computation of cost per Equivalent unit of material and conversion cost

	Material	Conversion
Cost incurred (a)	$ 72000	$ 52200
		( $ 38700+ $ 13500)
Equivalent unit (b)	9000	8700
cost per Equivalent unit (a) / (b)	$ 8	$ 6

(c) Total cost assigned to units transferred out

	Material	Conversion	Total cost assigned
Units finished and transferred out	8500	8500
cost per Equivalent unit	$ 8	$ 6
cost assigned	$ 68000	$ 51000	$ 119000

(d) Total cost assigned to Ending Inventory

	Material	Conversion	Total cost assigned
Ending inventory	500	200
cost per Equivalent unit	$ 8	$ 6
cost assigned	$ 4000	$ 1200	$ 5200

(e)

Reconciliation statement
Cost assigned
Total cost assigned to units transferred out	$ 119000
Total cost assigned to Ending Inventory	$ 5200
Total cost assigned	$ 124200
Cost to be accounted for
Direct material	$ 72000
Direct labor	$ 38700
Manufacturing oh	$ 13500
Total Cost to be accounted for	$ 124200