Question

Victory Company uses weighted-average process costing to account for its production costs. Conversion cost is added evenly throughout the process. Direct materials are added at the beginning of the process. During November, the company transferred 700,000 units of product to finished goods. At the end of November, the work in process inventory consists of 180,000 units that are 30% complete with respect to conversion. Beginning inventory had $420,000 of direct materials and $139,000 of conversion cost. The direct material cost added in November is $2,220,000, and the conversion cost added is $3,254,000. Beginning work in process consisted of 60,000 units that were 100% complete with respect to direct materials and 80% complete with respect to conversion. Of the units completed, 60,000 were from beginning work in process and 640,000 units were started and completed during the period.

Required:
a. Determine the equivalent units of production with respect to direct materials and conversion.
b. Compute both the direct material cost and the conversion cost per equivalent unit.
c. Compute the direct material cost and the conversion cost assigned to units completed and transferred out and ending work in process inventory.

Answer 1

Victory Company

Materials Conversion Total

a. Equivalent units of production: 880,000 754,000

b. Cost per equivalent unit $3.00 $4.50

c. Total cost transferred out $2,100,000 $3,150,000 $5,250,000

Ending Work in Process 540,000 243,000 783,000

Step-by-step explanation:

a) Data and Calculations:

Units transferred out = 700,000

Ending Work in process = 180,000

Total equivalent units:

Materials Conversion

Units transferred out 700,000 (100%) 700,000 (100%)

Ending Work-in-Process 180,000 (100%) 54,000 (30%)

Total equivalent units 880,000 754,000

Cost of production:

Materials Conversion Total

Beginning Inventory $420,000 $139,000 $559,000

Added in November 2,220,000 3,254,000 5,474,000

Total production costs $2,640,000 $3,393,000 $6,033,000

Cost per equivalent unit:

Materials Conversion

Total production costs $2,640,000 $3,393,000

Total equivalent units 880,000 754,000

Cost per equivalent unit $3.00 $4.50

Cost assigned:

Materials Conversion Total

Units transferred out 700,000 700,000

Cost per equivalent unit $3.00 $4.50

Total cost transferred out $2,100,000 $3,150,000 $5,250,000

Ending Work in Process 540,000 243,000 783,000

Total cost $2,640,000 $3,393,000 $6,033,000