Question

Shiffon Electronics manufactures music player. Its costing system uses two cost categories, direct materials and conversion costs. Each product must pass through the Assembly Department, the Programming department, and the Testing Department. Direct materials are added at the beginning of the production process. Conversion costs are allocated evenly throughout production. Shiffon Electronics uses weighted average costing. The following information is available for the month of March 2017 for the Assembly department Work in process, beginning inventory 320 units Conversion costs (30% complete) Units started during March 840 units Work in process, ending inventory: 160 units Conversion costs (55% complete) The cost details for the month of March are as follows: Work in process, beginning inventory: Direct materials $347,500 Conversion costs $364,000 Direct materials costs added during March $700,500 Conversion costs added during March $1,124,000 What amount of direct materials costs is assigned to the ending Work-in-Process account for March? (Round intermediary calculations to the nearest whole dollar.) O A $47,931 OB $96,621 O $104,632 OD $144,480

Answer 1

Solution:

Weighted Average (Average Cost) Method

Physical Units Count

Under this method the percentage completion done in the Beginning Inventory is ignored while calculating the equivalent completed units during the current period. Beginning Inventory Units are treated as fresh units introduced for production.

Cost Accounted for:

- The cost of opening work-in-progress and cost of the current period are aggregated and the aggregate cost is divided by output in terms of completed equivalent units.

- The units of Beginning Inventory of WIP and their cost are taken in full under this method

Working to find out the Cost per Equipment Unit of Production

Equivalent units of production (EUP) - Weighted Average Method
	Units	% Material	EUP - Material	% Conversion	EUP - Conversion
Units Completed and Transferred Out (Beginning 320 + Started 840 - Ending 160)	1000	100%	1000	100%	1000
Ending Work In Process	160	100%	160	55%	88
Equivalent units of production			1160		1088
Cost per equivalent unit of production
			Materials		Conversion
Cost related to beginning work in process			$347,500		$364,000
Cost incurred during the period			$700,500		$1,124,000
Total Costs		Costs	$1,048,000	Costs	$1,488,000
Equivalent Units of Production		EUP	1160	EUP	1088
Cost per Equivalent Unit of production			$903		$1,368

Now we need to find out the cost assignment with respect of Ending WIP – Direct materials

Cost Assignment:
	EUP	Cost per EUP	Total Cost
Cost of ending goods in process
Direct materials	160	$903.00	$144,480

Hence, the correct option is D. $144,480

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