Question

Cost of Units Completed and in Process The charges to Work in Process-Assembly Department for a period, together with information concerning production, are as follows. All direct materials are placed in process at the beginning of production. Work In Process-Assembly Department Bal., 9,000 units, 40% completed 72,360 To Finished Goods, 41,500 units Direct materials, 40,000 units 272,000 $6.80 Direct labor 80,000 Factory overhead 40,450 Bal., 2 units, 30% completed Cost per equivalent units of $6.80 for Direct Materials and $3.00 for Conversion Costs. a. Based on the above data, determine the different costs listed below. 1. Cost of beginning work in process inventory completed this period 2. Cost of units transferred to finished goods during the period 3. Cost of ending work in process inventory 4. Cost per unit of the completed beginning work in process inventory (Rounded to the nearest cent.) b. Did the production costs change from the preceding period? ber

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 at the beginning itself, beginning inventory is 100% complete in terms of materials, 0% 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. Units in beginning inventory Add: Units added during the period Less: Units completed and transferred out Units in ending inventory 9,000 40,000 -41,500 --> Of which 9000 units shall be from beg. inventory; Bal. 32500 units from current. 7,500 Particulars EUP- Materials 0 Beginning work in process Started, Completed and transferred Transferred to next process Ending work in process Equivalent Units of Production (EUP) Equivalent Units of Production (EUP) % Whole Units Materials 9,000 0% 32,500 100% 41,500 7,500 100% 49,000 32,500 32,500 7,500 40,000 % EUP- Conversion Conversion 60% 5,400 [9000 units x 0%; 9000 units x 60%] 100% 32,500 [32500 units x 100%; 32500 units x 100%] 37,900 30% 2,250 [7500 units x 100%; 7500 units x 30%] 40,150 NOTE: As all the materials are added at the beginning of the process, ending work in process inventory shall consist of 100% of materials in EUP calculation.

Materials Cost per equivalent units of production Cost of beginning work in process Cost added during the period Total Materials Costs & Conversion Costs Equivalent units of Production (EUP) Cost per Equivalent units of Production Cost per EUP included in beginning WIP Change in EUP between the periods $272,000 $272,000 40,000 $6.80 $6.80 $0.00 No Change Conversion [Under FIFO method, it shall not be considered here] $120,450 [Conversion = $80,000+ $40,450 = $120450] $120,450 40,150 [As computed EUP schedule presented above] $3.00 [$272000 / 40000 units = $6.80; $120450 / 40150 units = $30] $3.10 [For Materials, it is given that no change; Conversion = $11160 / (9000 x 2/5) = $3.1] $0.10 [Materials = $6.80 - $6.80 = $0; Conversion = $3.00 - $3.10 = $0.10] Decrease EUP Cost per EUP Totals [9000 units x $6.80] [$72360 - $61200] Materials - Beginning cost Conversion - Beginning Cost Cost of beginning WIP included Materials - Current Cost 0 Conversion - Current Cost 5,400 Current costs for completing beginning WIP a-1) Cost of beginning WIP completed during current period $6.80 $3.00 $61,200 $11,160 $72,360 $0 $16,200 $16,200 $88,560 [O units x $6.80] [5400 units x $3.00] [$72360 + $16200] a-4) Cost per unit of the completed beginning work in process inventory $9.84 ($88560 / 9000 units]

Cost per EUP Totals Materials - Current Cost 32,500 Conversion - Current Cost 32,500 Cost of units started and completed during current period EUP $6.80 $3.00 $221,000 $97,500 $318,500 [32500 units x $6.80] [32500 units x $3.00] a-2) Cost of units transferred out to the next department during the period $407,060 ($88560 + $318500] Cost per Cost of ending work-in-process EUP Totals Materials Conversion a-3) Cost of the ending work-in-process 7,500 2,250 EUP $6.80 $3.00 $51,000 $6,750 $57,750 (7500 units x $6.80] [2250 units x $3.00] Therefore, b) Yes, the product costs changed from the preceding period. c) Assuming that the direct materials cost per unit did not change from the preceding period, the conversion cost per equivalent unit was DECREASED in the current period.