Question

Our company manufactures Chemical X. Assume the company uses a weighted average. Separate direct materials and conversion costs.
Chemical X is comprised of two liquids, Liquid A and Liquid B. The formula of Chemical X is 60% Liquid A, 40% Liquid B. 65% of the mixed liquid is added at the beginning of the process; 35% added at the very end.
The average cost of the raw materials is $41 per gallon.
At the beginning of the month, there were 1,800 gallons in process, 80% through the process (as to conversion costs). The total costs in beginning WIP is $47,970 for materials and $100,800 for conversion costs.
During the month, 10,000 gallons were started. Conversion costs were $357,000 for the month. Compute direct material costs (hint use DM EUP under FIFO).
At the end of the month, there were 1,500 gallons in process, 40% through the process.
Answer each question separately. DO NOT just complete a table - this will result in a zero!
a. How many units were started AND completed? Completed?
b. Using FIFO, calculate equivalent units produced

c. What is the cost of the material added? (hint: use b.).
d. Using FIFO, calculate the cost per equivalent unit produced.
e. Using FIFO, what is the journal entry for the transferred to finished goods?
f. Using FIFO, what are the unit costs? (hint: you should have 2 numbers)
g. Using WA, calculate equivalent units of production.
h. Using WA, what is the cost per equivalent unit of production.
i. Using WA, what is the journal entry for transferred to finished goods?
j. Using WA, what is the cost per unit?

Answer 1

Solution:

A.

8500 How many units were started and completed? Completed? - Workings 1 10300 1800 Workiings 1 Units to be accounted for Beginning Work in Process Units Started during the month Total Less: Ending Work In Process Completed Units 10000 11800 1500 10300 =Completed Units - Beginning Work in Process Started and Completed =10300-1800 8500

B.

Equivalent Units Produced FIFO (Workings 2) Direct Materials Conversion i. Using WA, what is the j. Using WA, what is the 10105 9460 Workings 2: Materials Conversion Units Particulars Beginning Inventory Started and Completed Ending Inventory Equivalent Units % Complete EUP 1800 35% 8500 100% 1500 65% 11800 % Complete EUP 630 20% 360 8500 100% 8500 975 40% 600 10105 9460

C.

What is the cost of Direct Materials added? (Workings 3) 414305 Workings 3: Cost of Direct Materials added 10105*41 414305

D.

Using FIFO calculate the cost per equivalent unit produced (Workings 4) Direct Materials Conversion 41 37.741 Workings 4: Cost per Equivalent equivalent Current Costs Units unit 414305 10105 41 357000 9460 37.74 Materials (10105*43) Conversion (given)

E.

Journal Entry for the transferred finished goods (Workings 5) Journal Entry Finished Goods Work In Process 857457 857457 Workings 5: Cost of Goods Manufactured and Transferred out: From Beginning Inventory Materials Conversion Total 47970 100800 148770 25830 13586 39416 320772 Current Cost to complete (Beginning EUP * cost per equivalent unit) Cost of units started and completed Cost of Goods Manufactured Units Transferred out Cost per unit 669272 857457 435157 348500 422300 10300 41 10300 42.25 10300 83.25

F.

Using FIFO what are the unit cost (Workings 5) Direct Materials Conversion Cost 41 42.25

G.

Using WA Calculate EUP (Workings 6): Materials Conversion Cost 11275 10900 Workings 6 Weighted Average Materials Conversion Units Particulars Completed and transferred out Ending Inventory Equivalent Units % Complete EUP 10300 100% 1500 65% 11800 % Complete EUP 10300 100% 10300 975 40% 600 11275 10900

H.

Using WA, What is the cost per equivalent unit of prouction Materials Conversion Cost 41.00 42.00 Workings 7: Conversion Costs Direct Material Total Costs Costs to account for Beginning Work In Process Costs Added During the month Total Costs to account for Divided by: Total Equivalent Units of production Cost per equivakent units 47970 414305 4622751 11275 41.00 100800 357000 457800 10900 42.00 148770 771305 920075 83.00

I.

Journal Entry 854900 Finished Goods (10300*41)+(10300*42) Work In Process 854900

J.

Cost per unit =$41+$42 83.00

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