Question

Hannish Orchards, a juice manufacturer, uses a process that adds all the raw materials at the beginning of the process. Conversion costs are evenly distributed. Assume there are no beginning inventories. During the period the company started making 10,000 gallons. There were 2,000 gallons left in ending WIP that were 40% of the way through the process. Costs incurred during the period were: $ 16,000 Raw materials $ 5,500 Conversion costs The cost assigned to ending work in process would be closest to: A) $3,700 B) $4,300 C) $1,720 D) $1,780

Answer 1

The cost assigned to ending work in process can be calculated by finding the equivalent units of production for both the raw materials and conversion costs, and then multiplying these units by their respective costs. In this case, the cost assigned to ending work in process for raw materials is $12,800 and for conversion costs is $440, resulting in a total cost of $13,240.

Step-by-step explanation:

The cost assigned to ending work in process can be calculated by finding the equivalent units of production for both the raw materials and conversion costs, and then multiplying these units by their respective costs. In this case, the equivalent units of production for raw materials is 10,000 gallons (the starting gallons) minus 2,000 gallons (the ending gallons) = 8,000 gallons. The cost per gallon of raw materials is $16,000 / 10,000 gallons = $1.60. Therefore, the cost assigned to ending work in process for raw materials is 8,000 gallons × $1.60/gallon = $12,800.

The equivalent units of production for conversion costs can be calculated by taking into account the remaining work in process (2,000 gallons) and the percentage of completion (40%). The conversion costs incurred during the period were $5,500. Therefore, the cost assigned to ending work in process for conversion costs is 2,000 gallons × 40% × $5,500 / 10,000 gallons = $440.

Adding the costs assigned to ending work in process for raw materials ($12,800) and conversion costs ($440), the total cost assigned to ending work in process is $13,240. Therefore, the closest answer choice is A) $3,700.

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Answer 2

a. $3,700

Step-by-step explanation:

Unit completed = 10000 - 2000 = 8000

Equivalent unit of material = 10000

Equivalent unit of conversion = 8000 + (2000*40%)

Equivalent unit of conversion = 8800

Cost per equivalent unit of material = $16000/10000

Cost per equivalent unit of material = $1.6

Cost per equivalent unit of conversion = $5500/8800

Cost per equivalent unit of conversion = $0.625

Cost of ending WIP = Equivalent unit of material*Unit cost+Equivalent unit of conversion*Unit cost

Cost of ending WIP = 2000*$1.6 + (2000*40%)*$0.625

Cost of ending WIP = $3200 + $500

Cost of ending WIP = $3,700