Question

PROCESS COSTING Pl UNITS COMPLETED IN MAY UNITS ENDING INVENTORY IN WIP 100,000 20,000 80% COMP MATL 20% COMP CONVERSION $464,000 $ 312,000 100,000 MATERIAL COSTS INCURRED DURING THE MONTH CONVERSION COSTS INCURRED DURING THE MONTH OPERATING EXPENSES USING THE WEIGHTED AVERAGE METHOD COMPUTE A EQUIVALENT UNITS OF PRODUCTION FOR MATERIAL AND CONVERSION 8 UNIT COST FOR MATERIAL AND CONVERSION EUP C TOTAL COST FOR COMPLETED UNITS D COSTS FOR ENDING WORK IN PROCESS E IF 40,000 UNITS ARE SOLD FOR $20/UNIT MAKE THE ENTRY FOR THE SALE MAKE THE ENTRY FOR THE COST OF SALE PREPARE AN INCOME STATEMENT

Answer 1

A	Determination of the equivalent units of Production for Materials and Conversion
	Calculation of Units introduced during the period
	Units completed and Transferred out	100,000
	Add: Work in process, Ending	20,000
	Units introduced during the period	120,000
Weighted Average Cost method :-
	Statement of Equivalent Units of Production
	For the Month Ended May 31
	UNITS			Equivalent Units
		Physical Units	% complete	Materials	% complete	Conversion
	Units to be accounted for:
	Units introduced during the period	120,000
	Total units	120,000
	Units accounted for:
	Units completed and Transferred out	100,000	100%	100000	100%	100000
	Work in process, Ending	20,000	80%	16000	20%	4000
	Total units to be assigned costs	120,000		116000		104000

B	Determination of Unit Cost for Materials and Conversion EUP
	COSTS	Costs
		Materials	Conversion	Total
	Unit Costs
	Total Costs incurred during May	$             464,000	$        312,000	$            776,000
		÷	÷
	Equivalent units	116000	104000
	Cost per equivalent unit	$4.00	$3.00	$7.00
C	Assignment of Cost for completed units :-
		Equivalent units	Cost per equivalent unit	Total
	Cost for completed units	100000	$7.00	$700,000
D	Assignment of Cost for Ending Work in proces inventory :-
		Equivalent units	Cost per equivalent unit	Total
	Cost of Ending Work in proces inventory
	Materials	16000	$4.00	$64,000
	Conversion Costs	4000	$3.00	$12,000
	Cost of Ending Work in proces inventory			$76,000
E	Journal entry for sale :-
Sr. No.	Particulars			Debit	Credit
	Cash		Dr	$           800,000
	Sales (40000 units* $20 per unit)				$     800,000
	(To record sale of goods on cash)
	Journal entry for cost of sale :-
	COGS (40000 units* $7 per unit)		Dr	$           280,000
	Finished Goods FG Inventory				$     280,000
	(To record transfer of FG sold to COGS)
	Income Statement :-
	Sales	$           800,000
Less:	Cost of Goods sold	$           280,000
	Gross margin	$           520,000
Less:	Operating expenses	$           100,000
	Net operating income	$           420,000
F	Ending Completed goods Balance in units and in dollars after the sale:-
		Units	Cost per unit	Total
	Total Completed Goods during may	100,000	$                 7.00	$                700,000
Less:	Completed Goods sold during may	40,000	$                 7.00	$                280,000
	Ending Completed goods Balance	60,000	$                 7.00	$                420,000
G	Journal entry for cost of goods manufactured :-
	Finished Goods FG Inventory		Dr	$           700,000
	Work-in-Process WIP Inventory				$     700,000
	(To record transfer of cost of goods manufactured to FG)

H	Total Manufacturing Cost for May:-
a	Material costs	$           464,000
b	Conversion costs	$           312,000
c	Total Manufacturing Cost for May (a+b)	$           776,000
I	Total Prime Cost for May:-
a	Conversion costs	$           312,000
b	Overhead Cost (60% of Direct labor) (312000/160 *60)	$           117,000
c	Direct labor cost (a-b)	$           195,000
a	Material costs	$           312,000
b	Direct labor cost	$           195,000
c	Total Prime Cost for May (a+b)	$           507,000
J	Total Conversion Cost for May:-
a	Direct labor cost	$           195,000
b	Overhead Cost	$           117,000
c	Total Conversion costs (s+b)	$           312,000

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