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 3,000 items, 1/3 complete Units placed in production 12,000 units Units completed 9,000 units Ending work in process inventory 6,000 items, 1/2 complete Cost of beginning work in process $2,500, 60 % direct materials Direct material costs, current $9,000 Conversion costs, current $7,700 Direct materials are placed into production at the beginning of the process and conversion costs are incurred evenly throughout the process.

Requirement: Compute cost of goods sold and ending WIP using the weighted-average method

Answer 1

Equivalent unit

	Direct material	Conversion
Unit completed and transferred out	9000	9000
Ending work in process	6000*100% = 6000	6000*1/2 = 3000
Equivalent unit	15000	12000

Cost per equivalent unit

	Material	Conversion
Beginning WIP	2500*60% = 1500	1000
Cost added	9000	7700
Total Cost	10500	8700
Equivalent unit	15000	12000
Cost per equivalent unit	0.70	0.725

Cost of goods sold = 0.70+0.725*9000 = $12825

Cost of ending work in process = (6000*.70+3000*7.25) = 6375