Question

E3.3 The ledger of American Company has the following work in process account. Work in Process—Painting 5/1 Balance 3,590 5/31 Transferred out ? 5/31 Materials 5,160 5/31 Labor 2,530 5/31 Overhead 1,380 5/31 Balance ? Production records show that there were 400 units in the beginning inventory, 30% complete, 1,600 units started, and 1,700 units transferred out. The beginning work in process had materials cost of $2,040 and conversion costs of $1,550. The units in ending inventory were 40% complete. Materials are entered at the beginning of the painting process.

Instructions (a) How many units are in process at May 31? (b) What is the unit materials cost for May? (c) What is the unit conversion cost for May? (d) What is the total cost of units transferred out in May? (e) What is the cost of the May 31 inventory?

Answer 1

a. Units in process at May 31 = 400 + 1,600 - 1,700 = 300 units

b.

	Material	Conversion
Unit transferred out	1,700	1,700
Units in ending inventory	300	120 (300*40%)
Equivalent units	2,000	1,820

	Material	Conversion
Cost of beginning work in process	$2,040	$1,550
Cost added during the period	5,160	3,910
Total costs	$7,200	$5,460
Equivalent units	2,000	1,820
Cost per equivalent unit	$3.6	$3

b. Unit material cost = $3.6

c. Unit conversion cost = $3

d. Total cost of units transferred out:

Material (1,700*$3.6)	$6,120
Conversion costs (1,700*$3)	5,100
Total cost of units transferred out	$11,220

e. Cost of May 31 inventory:

Material (300*$3.6)	$1,080
Conversion costs (120*$3)	360
Total cost of May 31 inventory	$1,440