Question

On August 1, Torun Company had a Beginning WIP inventory of 10,000 units (80% complete for Materials; 40% complete for Conversion, with respective costs of $20,000 and $6,000).

During the month, 18,000 units were transferred out and 4,000 units remained in Ending WIP inventory (60% complete with respect to Materials; 20% complete with respect to Conversion costs).

Costs added during the month were $41,200 for Materials and $27,840 for Conversion.

1. Using the weighted average method, calculate the equivalent units of production for direct materials and conversion costs.

2. Calculate the cost per equivalent unit for direct materials and conversion.

3. Calculate the cost of units transferred to Finished Goods and cost of units in Ending WIP.

4. Reconcile your answer.

Answer 1

1) Equivalent unit

	Material	Conversion
Unit transferred out	18000	18000
Ending WIP	2400	800
Equivalent unit	20400	18800

2) cost per equivalent unit

	Material	Conversion
Beginning WIP	20000	6000
Cost added	41200	27840
Total Cost	61200	33840
Equivalent unit	20400	18800
Cost per equivalent unit	3	1.8

4) Cost

	Material	Conversion	Total
Cost of unit transferred out	54000	32400	86400
Cost of ending WIP	7200	1440	8640
Total	61200	33840	95040

5) Reconciliation

Cost to be accounted for
Beginning WIP	26000
Cost added	69040
Total Cost to be accounted for	95040
Cost accounted as
Cost of unit transferred out	86400
Cost of ending WIP	8640
Total Cost accounted as	95040