Question

Weston Products manufactures an industrial cleaning compound that goes through three processing departments—Grinding, Mixing, and Cooking. All raw materials are introduced at the start of work in the Grinding Department. The Work in Process T-account for the Grinding Department for May is given below:

Work in Process—Grinding Department
Inventory, May 1	93,100	Completed and transferred to the Mixing Department	?
Materials	664,940
Conversion	471,216
Inventory, May 31	?

The May 1 work in process inventory consisted of 35,000 pounds with $51,100 in materials cost and $42,000 in conversion cost. The May 1 work in process inventory was 100% complete with respect to materials and 30% complete with respect to conversion. During May, 407,000 pounds were started into production. The May 31 inventory consisted of 133,000 pounds that were 100% complete with respect to materials and 60% complete with respect to conversion. The company uses the weighted-average method in its process costing system.

Required:

1. Compute the Grinding Department's equivalent units of production for materials and conversion in May.

2. Compute the Grinding Department's costs per equivalent unit for materials and conversion for May.

3. Compute the Grinding Department's cost of ending work in process inventory for materials, conversion, and in total for May.

4. Compute the Grinding Department's cost of units transferred out to the Mixing Department for materials, conversion, and in total for May.

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, % of completion of beginning Work in Process Inventory doesn't affect the calculation of equivalent units of production. Physical Units of production: Units in beginning inventory Add: Units started during current period Less: Units in ending inventory Units completed and transferred out 35,000 407,000 -133,000 309,000 Particulars EUP- Materials EUP- Conversion Completed and transferred Ending work in process Equivalent Units of Production (EUP) 309,000 133,000 442,000 309,000 79,800 388,800 [309000 units x 100%; 309000 units x 100%] [133000 units x 100%; 133000 units x 60%] NOTE: As materials are added at the beginning the process itself, percentage of completion for materials is 100% in ending inventory.

2) Cost per equivalent units of production Cost of beginning work in process Cost added during the period Total Costs Equivalent units of Production (EUP) Cost per Equivalent units of Production Materials Conversion $51,100 $42,000 $664,940 $471,216 $716,040 $513,216 442,000 388,800 [As computed EUP schedule presented above] $1.62 $1.32 ($716040 / 442000 units = $1.62; $513216/388800 units = $1.32] 3) Cost per Cost of ending work in process EUP Totals Materials Conversion Total Cost of ending work in process 133,000 79,800 EUP $1.62 $1.32 $215,460 [133000 units x $1.62] $105,336 [79800 units x $1.32] $320,796 4) Cost of goods completed & transferred EUP Totals Cost per EUP $1.62 $1.32 Materials Conversion Total Cost of goods completed & transferred 309,000 309,000 $500,580 [309000 units x $1.62] $407,880 [309000 units x $1.32] $908,460