Question

-ok Saddleback Company makes camping lanterns using a single production process. All direct materials are added at the beginning of the manufacturing process. Information for the month of March follows: nt ences Units 117,800 Costs $ 192,000 344,000 $ 536,000 Beginning work in process (30% complete) Direct materials Conversion cost Total cost of beginning work in process Number of units started Number of units completed and transferred to finished goods Ending work in process (65% complete) Current period costs Direct materials Conversion cost Total current period costs 243,000 334,800 ? $ 507,400 648,000 $1,155,400 Required: 1. Using the weighted-average method of process costing, complete each of the following steps: a. Reconcile the number of physical units worked on during the period. b. Calculate the number of equivalent units. c. Calculate the cost per equivalent unit. d. Reconcile the total cost of work in process.

Answer 1

a) 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 completed and transferred out Units in ending inventory 117,800 243,000 -334,800 26,000 Units Reconciliation: Physical Units Units in beginning inventory 117,800 Units completed and transferred out Add: Units started during the period 243,000 Add: Units in ending work in process Total units to be accounted for 360,800 Total units accounted for Physical Units 334,800 26,000 [As calculated] 360,800 b) Particulars Physical Units EUP- Materials EUP- Conversion Completed and transferred Ending work in process Equivalent Units of Production (EUP) 334,800 26,000 360,800 334,800 26,000 360,800 334,800 16,900 351,700 [334800 units x 100%; 334800 units x 100%] [26000 units x 100%; 26000 units x 65%]

NOTE: As materials are added at the beginning of the process itself, percentage of completion for materials is 100% in ending inventory. c) 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 $192,000 $507,400 $699,400 360,800 $1.93847 Conversion $344,000 $648,000 $992,000 351,700 [As computed EUP schedule presented above] $2.82059 ($699400 / 360800 units = $1.93847; $992000 / 351700 units = $2.82059]

d) Costs Reconciliation: Materials Conversion Total Units Completed $649,000 $944,334 $1,593,334 Ending Inventory $50,400 $47,668 $98,068 Total Cost Accounted For $699,400 $992,002 $1,691,402 Workings:

Cost of goods completed & transferred EUP Totals Cost per EUP $1.93847 $2.82059 Materials Conversion Total Cost of goods completed & transferred 334,800 334,800 $649,000 (334800 units x $1.93847] $944,334 [334800 units x $2.82059] $1,593,334 Cost per Cost of ending work in process EUP Totals EUP Materials Conversion Total Cost of ending work in process 26,000 16,900 $1.93847 $2.82059 $50,400 [26000 units x $1.93847] $47,668 [16900 units x $2.82059] $98,068