Question

Tap Corp. is a pharma company based in London. It makes a drug in a single processing department. Direct materials are added at the start of the process. Conversion costs are added evenly during the process. Spoilage is detected upon inspection at the completion of the process. Spoiled units are disposed of at zero net disposal value. Tap uses the weighted average method of process costing. The following information for June 2010 is available. Equivalent Units Physical Direct Conversion Units Materials Costs Work in process, June 1 11,000 Started during June ? Completed and transferred out during June 41,000 Normal spoilage 100 Abnormal spoilage 100 Work in process, June 31 aDegree of completion: direct materials, 100%; conversion costs, 30%. bDegree of completion: direct materials, 100%; conversion costs, 70%. Total Costs for June 2010 Work in process, beginning $ Direct materials 70,500 $ Conversion costs 42,500 113,000 Direct materials added during June 351,000 Conversion costs added during June 428,000 Total costs to account for $892,000 12,8006 Required: 1. Calculate the cost per equivalent unit for direct materials and conversion costs. 2. Summarize the total costs to account for, and assign them to units completed (and transferred out) and to units in ending work in process.

Answer 1

Process Cost / Production Report:
Particulars (Req.)	Physical units	DM	Conv.	Total
WIP Begin	11000	11000	11000
Started & Completed	30000	30000	30000
Transferred out	41000
Normal Loss	100
Abnormal Loss	100	100	100
WIP End	12800	12800	8960 (70%)
Equivalent units (A)		53900	50060
Total Costs:
WIP Begin		70500	42500	113000
Incurred during mth		351000	428000	779000
(2) Total Costs to account for (B)		421500	470500	892000
(1) Cost per Eq. unit (B/A)		7.82	9.40
(2) Cost of transferred out:		320622	385348	705969	(41000*unit cost)
(2) Cost of WIP End		100096	84213	184309
Cost of Abnormal Loss		782	940	1722
Total Costs accounted for				892000
Note: The normal spoilage is consumed by other costing heads, like
transferred out, wip end and abnormal spoilage.