Below is selected information from Chipset's cost of production report:
Cost per equivalent unit in process |
$10 |
Units completed |
15,000 |
Total costs in process |
$332,000 |
Equivalent units of materials in ending inventory |
2,000 |
Cost per equivalent unit of materials |
$6 |
The ending inventory of work-in-process is complete as to
materials.
The cost of conversion in the ending inventory is:
Select one:
A. $170,000
B. $308,000
C. $ 30,800
D. $ 15,800
Solution: The correct option is “A” i.e $ 1,70,000(see note below)
Note:
Particulars |
Materials |
Conversion |
Units completed And transferred |
15000 |
15000 |
Units in ending WIP |
2000 |
X units |
Total Equivalent Units |
17000 |
15000+X units |
Cost per Equivalent Unit |
$ 6 |
$ 4 |
Total cost per equivalent unit in process=$10
Cost per equivalent units in materials=$ 6
Cost per equivalent units in conversion=$ 4
Total costs in process=$ 3,32,000
Therefore $ 6*17000 units+ $ 4(15000+ X units)=$ 332000
X= 42500 units
Equivalent units of conversion in ending inventory=42500 units
Therefore the Cost of conversion in the ending inventory is 42500 units *$4/equivalent unit=$ 1,70,000
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