AAB company is reviewing the behavior of its various activities. AAB is considering various costs under process costing system. Its costing system utilizes two cost categories, direct materials and conversion costs. Direct materials are added at the beginning of production. Conversion costs are allocated evenly throughout production.
Data for February 2013 are:
Work in process, beginning inventory, 40% converted 200 units
Units started during February 600 units
Work in process, ending inventory: 100 units
30% complete as to conversion costs
100% complete as to materials
Costs for February 2013 are:
Work in process, beginning inventory:
Direct materials $100,000
Conversion costs $100,000
Direct materials costs added during February $1,000,000
Conversion costs added during February $1,250,000
What were the equivalent units of direct materials and conversion costs, respectively, at the end of February? Assume Injection Molding, Inc., uses the weighted-average process costing method.
Select one:
a. 800, 800
b. 800, 730
c. 600, 500
d. 800, 700
We want the Equivalent units of Direct materials and Conversion costs. Not asked to calculate Equivalent cost per unit, so we do not need the information about costs.
First we need to find Units Completed/transferred
= Units in Opening Inventory + Units Started - Units in Closing WIP inventory
= 200 + 600 - 100
= 700 units
Equivalent units
For Direct materials = Ending WIP units x 100% + Units transferred/completed
= 100 + 700
= 800 units
For Conversion cost = Ending WIP units x 30% + Units completed/transferred
= 100 x 30% + 700
= 730 units
So, Answer is Option b - 800, 730
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