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Question 1 (20 marks) ABC, Inc. manufactures a product, plastic pipe that goes through three departments prior to completion.

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Answer #1

Equivalent units = Units transferred + Ending WIP x Completion
Cost per equivalent unit = (Beginning Cost + Cost added) / Equivalent units

a.

Physical Flow % Materials Material % Conversion Conversion
Units to account for
Beginning Work in process 70000
Units started 350000
Total Units to account for 420000
Units accounted for
Units transferred 380000 100% 380000 100% 380000
Equivalent units in ending WIP 40000 75% 30000 25% 10000
Total units accounted for 420000
Equivalent units of production 410000 390000

b.

Material Conversion Total
Cost of beginning work in process $         86,000 $             36,000 $       122,000
Cost added during the production $       447,000 $          198,000 $       645,000
Total Cost $       533,000 $          234,000 $       767,000
Equivalent units of production 410000 390000
Cost per Equivalent unit $              1.30 $                 0.60 $              1.90

c.

Material Conversion Total
Ending Work in process inventory
Equivalent units 30000 10000
Cost per Equivalent unit $              1.30 $                 0.60
Cost of Ending Work in process inventory $         39,000 $               6,000 $          45,000
Units completed and transferred out
Units transferred 380000 380000
Cost per Equivalent unit $              1.30 $                 0.60
Cost of Units transferred $       494,000 $          228,000 $       722,000

d.

Costs to be accounted for
Cost of beginning work in process $       122,000
Cost added during production $       645,000
Total Costs to be accounted for $       767,000
Costs accounted for as follows
Cost of Ending work in process $         45,000
Cost of Units transferred $       722,000
Total Costs accounted for $       767,000
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