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 (a) direct labor and (b) direct materials.
b. Compute both the direct labor cost and the direct materials cost per equivalent unit.
c. Compute both direct labor cost and direct materials cost assigned to (a) units completed and transferred out and (b) ending goods in process inventory.

Answer 1

a) equivalent units:

EUP for materials = 880,000 units

EUP for conversion costs = 754,000 units

b) cost per equivalent unit:

materials cost per EUP = $3 per EUP

conversion costs per EUP = $4.50 per EUP

c) costs assigned to units transferred out and ending WIP:

units transferred out = $5,250,000

ending WIP = $783,000

Step-by-step explanation:

units transferred out 700,000

ending WIP 180,000

100% completed for materials

30% completed for conversion costs

beginning WIP:

materials $420,000

conversion costs $139,000

materials added during September $2,220,000

conversion costs added during September $3,254,000

total materials costs = beginning WIP + added costs = $420,000 + $2,220,000 = $2,640,000

total conversion costs = beginning WIP + added costs = $139,000 + $3,254,000 = $3,393,000

a) equivalent units:

EUP for materials = 700,000 + 180,000 = 880,000

EUP for conversion costs = 700,000 + (180,000 x 30%) = 754,000

b) cost per equivalent unit:

materials cost per EUP = $2,640,000 / 880,000 = $3

conversion costs per EUP = $3,393,000 / 754,000 = $4.50

c) costs assigned to units transferred out and ending WIP:

units transferred out = 700,000 x $7.50 = $5,250,000

ending WIP = (180,000 x $3) + (54,000 x $4.50) = $783,000