Question

At OxyCorp, direct materials are added at the beginning of the process and conversions costs are uniformly applied. Other details include:

WIP beginning (55% for conversion)	13,700 units
Units started	125,000 units
Units completed and transferred out	116,500 units
WIP ending (35% for conversion)	22,200 units
Beginning WIP transfer costs	$40,000
Beginning WIP direct materials	$50,300
Beginning WIP conversion costs	$22,500
Costs of transfer costs added	$360,000
Costs of materials added	$412,000
Costs of conversion added	$301,000

  
Please calculate using the average cost method discussed in class.
  
Total Costs Accounted for (rounded to 2 decimal places):

	a	158,064
	b	$195,582
	c	$1,026,365
	d	$1,184,429

Answer 1

Solution:

Computation of Equivalent unit of Production - Oxycorp.
Particulars	Physical Units	Transferred in cost	Material	Conversion
Units to account for:
Beginning WIP	13700
Started into Production	125000
Total units to account for	138700
Unit completed & Transferred out	116500	116500	116500	116500
Closing WIP:	22200
Prior deparment cost (100%)		22200
Material (100%)			22200
Conversion (35%)				7770
Equivalent units of production	138700	138700	138700	124270

Computation of Cost per equivalent unit of Production -Oxycorp.
Particulars	Transferred in cost	Material	Conversion
Opening WIP	$40,000.00	$50,300.00	$22,500.00
Cost Added during Period	$360,000.00	$412,000.00	$301,000.00
Total cost to be accounted for	$400,000.00	$462,300.00	$323,500.00
Equivalent units of production	138700	138700	124270
Cost per Equivalent unit	$2.88	$3.33	$2.60

Computation of Cost of ending WIP and units completed & transferred out -OxyCorp.
Particulars	Prior Department Cost	Material	Conversion	Total
Equivalent unit of Ending WIP	22200	22200	7770
Cost per equivalent unit	$2.88	$3.33	$2.60
Cost of Ending WIP (Equivalent unit * Cost per equivalent unit)	$63,936	$73,926	$20,202	$158,064
Units completed and transferred	116500	116500	116500
Units completed and transferred	$335,520	$387,945	$302,900	$1,026,365

Production Cost Report - Oxycorp.
Particulars	Amount
Costs to be accounted for:
Cost of beginning WIP inventory	$112,800.00
Prior department cost transferred In	$360,000.00
Cost added to production	$713,000.00
Total cost accounted for	$1,185,800.00
Costs accounted for as follows:
Cost of unit completed	$1,026,365
WIP April 30:
Prior Department Cost	$63,936
Material	$73,926
Converison	$20,202
Total cost accounted for	$1,184,429

Total Costs Accounted for = $1,184,429

Hence option d is correct.