Question

Sticky Wicket makes glue in a two-step process. In the first process, collagen and corn starch are added to water. All direct materials are added at the beginning of the process. Conversion costs are added evenly throughout this process. In the second process, the glue is bottled and packaged for shipment.

At the beginning of June, there were 10,000 units in beginning work in process in the first processing department. Those units were 30% complete as far as conversion costs go. The company had spent $20,000 on direct materials and $38,400 on conversion costs. During June, 100,000 units were started into production. Of those 100,000 units, 70,000 were transferred out to packaging and the remaining units are 60% complete as to conversion costs.

Costs for June were:

                        Direct Materials                      $100,000

                        Direct Labor                             $10,000

                        Manufacturing Overhead         $110,000

What were the equivalent units for June vis-à-vis Direct Materials?

What were the equivalent units of work for June vis-à-vis Conversion Costs?

What was the cost per unit for Direct Materials?

What was the cost per unit for Conversion Costs?

How many dollars went to the next process?

How many dollars stayed in ending work in process?

Answer 1

Ending work in process = 100000-70000 = 30000 Units

a) Equivalent unit of direct material = 80000+30000 = 110000 Units

b) Equivalent unit of conversion = 80000+(30000*60%) = 98000 Units

c) Cost per equivalent unit of direct material = (20000+100000)/110000 = 1.09

d) Cost per equivalent unit of conversion = (38400+10000+110000)/98000 = 1.62

e) Cost of unit transferred to next process = (1.09+1.62)*80000 = $216800

f) Cost of ending work in process = (30000*1.09+18000*1.62) = $61860