Question

Pacific Ink had beginning work-in-process inventory of $1,069,960 on October 1. Of this amount, $459,200 was the cost of direct materials and $610,760 was the cost of conversion. The 63,000 units in the beginning inventory were 30 percent complete with respect to both direct materials and conversion costs.

During October, 132,000 units were transferred out and 45,000 remained in ending inventory. The units in ending inventory were 80 percent complete with respect to direct materials and 40 percent complete with respect to conversion costs. Costs incurred during the period amounted to $3,578,400 for direct materials and $4,182,090 for conversion.

Required:

a. Compute the equivalent units for the materials and conversion cost calculations.

b. Compute the cost per equivalent unit for direct materials and for conversion costs using the weighted-average method.

Answer 1

Question 1

Using Weighted Average Method

Particulars	Units	% Materials	EUP Materials	% Conversion	EUP Conversion
Units Completed and Transferred Out	132,000	100%	132,000	100%	132,000
Ending Work in Process Inventory	45,000	80%	36,000	40%	18,000
Total	177,000		168,000		150,000

EUP Stands for Equivalent Annual Units of Production

EUP Materials = Units * % Materials

EUP Conversion = Units * % Conversion

Question 2

Particulars	Materials	Conversion
Beginning Work in Process Inventory Cost	459,200	610,760
Add: Cost Added during the Month of October	3,578,400	4,182,090
Total Costs	4,037,600	4,792,850

Particulars	Direct Materials	Conversion
Total Costs	4,037,600	4,792,850
÷ Equivalent Annual Units of Production	168,000	150,000
Cost per Equivalent Annual Unit	24.03	31.95