1. Arnold's Custom Log Beds manufactures log beds in a production line.
Direct materials are
added at the beginning of the production process. Conversion costs are consumed evenly
throughout production. The following information pertains to the month of April:
Work in process, beginning inventory: 85 units
Direct materials (100% complete)
Conversion costs (45% complete)
Units started during April 125 units
Work in process, ending inventory: 60 units
Direct materials (100% complete)
Conversion costs (65% complete)
Costs added in April:
Direct materials $38,000
Conversion costs $28,000
Work in process, beginning inventory:
Direct materials $24,000
Conversion costs $19,500
Required: if Arnold's used the weighted average method of process costing.
1) What is the total manufacturing cost per chip for April?
2) Determine the costs that would be assigned to
a) Finished goods inventory
b) Ending work-in-process inventory
Solution
Tabular analysis and overall answer for the above questions
Step-1:Calculation of Equivalent units of production
Unit to be accounted for
WIP beginning ----------------------------------------------85 units
Started in to production-----------------------------------125 units
Total units----------------------------------------------------210 units
Unit accounted for
Completed and transferred out------------------------150 units (210-60)
Ending WIP------------------------------------------------60 units
Total units-----------------------------------------------------210 units
Step2: compute equivalent unit of product
Equivalent units
Materials conversion
Unit transferred---------------------------------------------------150 150
Beginning WIP
60 x 100%--------------------------------------------60
60 x 65%--------------------------------------------------------------------------------39
Total equivalent units ----------------------------------------210 units 189 units
We can summarize the above by the following table,
Materials Conversion
Physical % of Equivalent Units % of Equivalent Units
Units completion of Production completion of Production
Units completed 150 100% 150 100% 150
Ending work in
60 100% 60 65% 39
process units
Total 210 210 189
Step 3: compute unit production costs
Unit production cost = unit materials cost + unit conversion cost
Material cost
Materials cost of beginning WIP----------------------------------------------24,000
Direct materials cost add to production during period---------------------38,000
Total material cost----------------------------------------------------------------------62,000
Therefore, unit materials cost = total material cost
Equivalent of materials
= 62,000
210
Unit material cost = $295.24 per unit
Conversion cost
Conversion cost at beginning WIP--------------------------------------19,500
Conversion cost at added to production during period-------------28,000
Total conversion cost ----------------------------------------------------47,500
Unit conversion cost = total conversion cost
Equivalent of conversion
= 47,500
189
Unit conversion cost= $251.32 per unit
So, Total manufacturing cost per unit= unit material cost + unit conversion cost
=$295.24 + 251.32
[Link] PER UNIT = $546.56
2) a) cost of finished goods inventory
Material conversion
Equivalent units-----------------------------------150 150
Cost per equivalent-------------------------------295.24 251.32
Cost of finished goods---------------------------44,286 37,689
Total cost of finished goods= material cost +conversion cost
= 44,286 + 37,689
[Link] GOODS =$81,984
b) Cost of ending WIP inventory
Material conversion
Equivalent units-----------------------------------------60 39
Cost per equivalent unit------------------------------295.24 251.32
Cost of finished goods--------------------------------17,714.4 9,801.48
Total cost of ending wip inventory = material cost of ending inv + conversion cost of ending inv
= 17,714.4 + 9,801.48
[Link] WIP INVENTORY = 27,515.88
Cost
Finished Goods $81,984.13
Ending Work-in-Process $27,515.87
