Question

Stilton Audio is a producer of speakers and amplifiers which are housed in plastic cabinets. Currently production of the plastic cabinets as well as final product assembly is completed in-house.

 

For accounting purposes, Stilton Audio uses the weighted average method, where plastic cabinets speaker and amplifier components are added at the beginning of the assembly process.

 

The following are cost and production data for the assembly process for April:

Production:

Units in process, April 1, 60 percent complete                60,000

Units completed and transferred out                                150,000

Units in process, April 30, 20 percent complete             30,000

Costs:

WIP, April 1:

Plastic cabinets                                                               $ 1,200,000

Speaker and amplifier components                              12,600,000

Conversion costs                                                               5,400,000

Costs added during April:

Plastic cabinets                                                                    2,400,000

Speaker and amplifier components                               25,200,000

Conversion costs                                                                 8,640,000

Required:

1. Prepare a physical flow analysis for the assembly department for April.

2. Calculate equivalent units of production for the assembly department for April.

3. Calculate unit cost for the assembly department for April.

4. Calculate the cost of units transferred out and the cost of EWIP inventory.

5. Prepare a cost reconciliation for the assembly department for April.

Answer 1

1. Prepare a physical flow analysis for the assembly department for April.

	Physical units		Physical units
Beginning Units	60000	Units completed and transferred out	150000
Unit started	120000	Ending units	30000
Total units	180000	Total units	180000

2. Calculate equivalent units of production for the assembly department for April.

	Plastick	Speaker and amplifier	Conversion Cost
Unit completed and transferred out	150000	150000	150000
Ending work in process	30000	30000	6000
Equivalent unit	180000	180000	156000

3. Calculate unit cost for the assembly department for April.

	Plastic	Speaker and amplifier components	Conversion Cost
Beginning work in process	1200000	12600000	5400000
Cost added	2400000	25200000	8640000
Total Cost	3600000	37800000	14040000
Equivalent Unit	180000	180000	156000
Cost per equivalent unit	20	210	90

4. Calculate the cost of units transferred out and the cost of EWIP inventory.

Cost of unit transferred out = (20+210+90)*150000 = $48000000

Cost of ending work in process = (230*30000+90*6000) = 7440000

5. Prepare a cost reconciliation for the assembly department for April.

Cost to be account for
Beginning work in process	19200000
Cost added	36240000
Total cost to be accounted for	55440000
Cost accounted as
Cost of units transferred out	48000000
Cost of ending work in process	7440000
Total Cost accounted as	55440000