Question

The Mixing Department of Cherry Manufacturing Company has the following production and manufacturing cost data for January.

Production: Beginning inventory 8,000 units that are 100% complete as to materials and 40% complete as to conversion costs; units started into production 27,000; ending inventory of 12,000 units 20% complete as to conversion costs.

Manufacturing Costs: Beginning work in process inventory of $40,000, comprised of $30,000 of materials and $10,000 of conversion costs. Materials added during the month, $110,000; labor and overhead applied during the month, $62,000 and $55,000, respectively.

Instructions
(a) Compute the equivalent units of production for materials and conversion costs for the month of January.
(b) Compute the unit costs for materials and conversion costs.
(c) Determine the costs to be assigned to the units transferred out and ending work in process.

Answer 1

(a) Compute the equivalent units of production for materials and conversion costs for the month of January.

	Physical unit	%	EUP-material	%	EUP-conversion
Units transferred out	23000	100%	23000	100%	23000
Ending work in process	12000	100%	12000	20%	2400
Total	35000		35000		25400

(b) Compute the unit costs for materials and conversion costs.

Unit cost for material = (30000+110000)/35000 = 4 per unit

Unit cost of conversion = (10000+62000+55000)/25400 = 5 per unit

(c) Determine the costs to be assigned to the units transferred out and ending work in process.

Cost of units transferred out = (4+5)*23000 = 207000

Cost of ending work in process = (12000*4+2400*5) = 60000