Question

1) The smelting department of Company X has following production and cost data for September: • Production: Beginning work in process 200 units that are 100% complete as to materials and 84% complete as to conversion costs; units started into production 1,000 units; units transferred out to next department 970 units; ending work in process are 100% complete as to materials and 48% complete as to conversion costs. • Manufacturing costs: Beginning work in process TL8,800 materials, TL9,260 labor and TL2,800 manufacturing overhead costs. In current period, TL50,700 worth of materials, TL25,600 worth of labor and TL34,000 worth of manufacturing overhead costs are incurred.

a) Compute the material cost portion of the ending inventory if the company uses WA method to compute equivalent units.

b) Compute the conversion cost portion of the ending inventory if the company uses FIFO method to compute equivalent units. method to compute equivalent units.

c) Compute the material cost portion of the transferred out inventory if the company uses FIFO method to compute equivalent units.

d) Compute the conversion cost portion of the transferred out inventory if the company uses WA method to compute equivalent units

Answer 1

If the company uses Weighted Average Method:

a)

Cost of ending work in process				EUP	Cost/ EUP	Total Cost
Direct Materials				230	$   49.58	$      11,404.17

d)

Cost of units transferred out				EUP	Cost/ EUP	Total Cost
Conversion				970	$   66.33	$      64,337.47

Workings:

Equivalent Units of Production (EUP) - Weighted Average Method
				Units	% Mat.	EUP- Mat.	% Conv.	EUP- Conv.
Units completed and transferred out				970	100%	970	100%	970
Units in ending inventory				230	100%	230	48%	110.4
Equivalent units of production						1200		1080.4

Cost per Equivalent Unit of Production
					Materials		Conversion
Beginning costs					$         8,800.00		$   12,060.00
During the month costs					$      50,700.00		$   59,600.00
Total cost				Costs	$      59,500.00	Costs	$   71,660.00
÷	Equivalent units of production			EUP	1200	EUP	1080.4
Cost per equivalent unit of production					$              49.58		$           66.33

If the company uses FIFO Method:

b)

Cost of Ending WIP
	Units	Cost/eq. units	Costs
Conversion	110.4	$               65.32	$      7,211.57

c)

Cost of Transferred Out Inventory
	Units	Costs
Direct Material	770	$       47,839.00	($ 8800 + 770 units x $ 50.70)

Workings:

Statement of equivalent production for Blending Department					Degree of completion
					Direct Material			Conversion
Particulars	Units	Particulars	Units		%	Units		%	Units
Opening WIP	200	Transfer to next process:
Material Introduced	1000	From O/p WIP	200		-	-		16%	32
		From Current Intro	770		100%	770		100%	770
		Closing WIP	230		100%	230		48%	110.4
	1200		1200			1000			912.4

Statement of cost per equivalent production
Element of costs	Units	Costs	Cost/eq. units
Direct Material	1000	$        50,700.00	$                50.70
Conversion	912.4	$        59,600.00	$                65.32
			$             116.02