Question

Bottles for Africa has been manufacturing plastic bottles for the last couple of years. The company uses a process costing system under the weighted average method to calculate equivalent units and costs per unit. Materials are added at the beginning of the process whilst conversion costs are allocated evenly over the process. The following information is available for the past month:

Work-in-progress opening balance (500 bottles 70% complete) R7,750

Direct materials R2,500

Conversion costs R5,250

Types of costs incurred:

Direct materials opening balance R500

Direct materials purchased R50,000

Direct materials closing balance R1,000

Conversion cost incurred R580,000

Conversion cost issued to production R600,000

Number of bottles completed 25,000

Work-in-progress closing balance (750 bottles 50% complete) ? Required:

1. Calculate the equivalent number of units completed for both direct materials and conversion cost.

Direct materials units .....

Conversion costs units .....

2. Calculate the direct material and conversion cost per equivalent unit. (Round your answers to 2 decimal places.)

Direct materials per equivalent unit

Conversion cost per equivalent unit

3. Calculate the closing balance of Work-in-progress. (Round your answer to 2 decimal places.)

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. Particulars Completed and transferred Ending work in process Equivalent Units of Production (EUP) Physical Units 25,000 750 25,750 % Materials 100% 100% EUP- Materials 25,000 750 25,750 % EUP- Conversion Conversion 100% 25,000 [25000 units x 100%; 25000 units x 100%] 50% 375 [750 units x 100%; 750 units x 50%] 25,375 NOTE: As materials are added at the beginning of the process itself, percentage of completion for materials is 100% in ending inventory. 2) Direct materials opening balance Add: Direct materials purchased Direct materials available Less: Direct materials closing balance Direct materials used in production R500 R50,000 R50,500 -R1,000 R49,500

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 R2,500 R49,500 R52,000 25,750 R2.02 Conversion R5,250 R600,000 [Materials as calculated above] R605,250 25,375 [As computed EUP schedule presented above] R23.85 [R52000 / 25750 units = R2.02; R605250 / 25375 units = R23.85] 3) Cost per Cost of ending work in process EUP Totals 750 Materials Conversion Total Cost of ending work in process EUP R2.02 R23.85 375 R1,515.00 [750 units x R2.02] R8,944.00 [375 units x R23.85] R10,459.00