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 first process. During November, the first process transferred 755,000 units of product to the second process. Additional information for the first process follows. At the end of November, work in process inventory consists of 200,000 units that are 70% complete with respect to conversion. Beginning work in process inventory had $248,300 of direct materials and $179,000 of conversion cost. The direct material cost added in November is $1,661,700, and the conversion cost added is $3,401,000. Beginning work in process consisted of 74,000 units that were 100% complete with respect to direct materials and 80% complete with respect to conversion. Of the units completed, 74,000 were from beginning work in process and 681,000 units were started and completed during the period.

A. Compute both the direct material cost and the conversion cost per equivalent unit.
B. 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

A. Cost per equivalent unit $2.00 $4.01

B. Costs assigned to:

i. Units completed and transferred out $1,510,000 $3,027,550

ii. Ending work in process inventory $400,000 $561,400

Step-by-step explanation:

a) Data and Calculations:

Units Materials Conversion Total

Beginning Work in Process 74,000 $248,300 $179,000 $427,300

Started 881,000 $1,661,700 3,401,000 5,062,700

Units completed 755,000 $1,910,000 $3,590,000 $5,490,000

Ending Work in Process 200,000

Equivalent units:

Started and Completed 755,000 755,000 755,000 (100%)

Ending work in Process 200,000 200,000 140,000 (70%)

Equivalent units 955,000 895,000

Cost per equivalent unit

Total production costs $1,910,000 $3,590,000

Equivalent units 955,000 895,000

Cost per equivalent unit $2.00 $4.01

Cost assigned to:

Units completed and transferred out:

Materials = $1,510,000 ($2 * 755,000)

Conversion = 3,027,550 ($4.01 * 755,000)

Total $4,537,550

Ending Work in Process Inventory:

Materials = $400,000 ($2 * 200,000)

Conversion = 561,400 ($4.01 * 140,000)

Total $961,400