Question

Surf Products Company uses an automated process to clean and polish its souvenir items. For March, the company had the following activities:

Beginning work in process inventory   0 items
Units placed in production   400 units
Units completed   175 units
Ending work in process inventory   225 items, 60% complete
  
Cost of beginning work in process   $0
Direct material costs, current   $32,000
Conversion costs, current   $18,600

Direct materials are placed into production at the beginning of the process and conversion costs are incurred evenly throughout the process.

Required:

Prepare a production cost worksheet using the 5-Step method.

Answer 1

Solution:

Surf Product Co.
Computation of Equivalent unit of Production
Particulars	Physical Units	Material	Conversion
Units to account for:
Beginning WIP	0
Started into Production	400
Total units to account for	400
Units accounted for:
Unit completed & Transferred out	175	175	175
Units in ending inventory:	225
Material (100%)		225
Conversion (60%)			135
Equivalent units of production	400	400	310

Surf Product Co. Computation of Cost per equivalent unit
Particulars	Material	Conversion	Total
Opening WIP	$0	$0	$0
Cost Added during Period	$32,000	$18,600	$50,600
Total cost to be accounted for	$32,000	$18,600	$50,600
Equivalent units of production	400	310
Cost per Equivalent unit	$80.00	$60.00

Surf Product Co. Computation of Cost of ending WIP and units completed & transferred out
Particulars	Material	Conversion	Total
Equivalent unit of Ending WIP	225	135
Cost per equivalent unit	$80.00	$60.00
Cost of Ending WIP (Equivalent unit * Cost per equivalent unit)	$18,000	$8,100	$26,100
Units completed and transferred	175	175
Cost of units completed & Transferred (Unit completed * cost per equivalent unit)	$14,000	$10,500	$24,500

Cost reconciliation - Surf Product Co.
Particulars	Amount
Costs to be accounted for:
Cost of beginning WIP inventory	$0.00
Cost added to production	$50,600.00
Total Costs to be accounted for	$50,600.00
Costs accounted for as follows:
Cost of unit transferred out	$24,500
Ending WIP:
Material	$18,000
Converison	$8,100
Total Ending WIP	$26,100
Total costs accounted for	$50,600