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Concept explainers
Equivalent Unit; Assigning Costs; Cost Reconciliation-Weighted-Average Method
Superior Micro products uses the weighted-average method in its
Required:
- Compute the equivalent units of materials, labor, and overhead in the ending work in process inventory for the month.
- Compute the cost of ending work in process inventory for materials, labor, overhead, and in total for January.
- Compute the cost of the units transferred to the next department for materials, labor, overhead, and in total for January.
- Prepare a cost reconciliation for January. (Note: Your will not be able to break the cost to be accounted for into the cost of beginning work in process inventory and costs added during the month.)
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Computation of equivalent units for each element of cost, cost per equivalent unit and total cost of ending inventory and completed units describes the steps taken for computation of total units completed and equivalents units of each element of cost. The total cost of ending work in process and completed and transferred out shall be determined based on equivalent units and cost per equivalent units. The total units completed are computed by considering the total units in process and ending work in process units. The reconciliation statement of total cost to account and accounted has to be reconciled.
Requirement1:
TheEquivalent number units of each element of cost shall be determined.
Answer to Problem 12E
Solution: The total units completed and transferred out from process shall be as under:
UNITS TO BE ACCOUNTED FOR: | ||
Units Completed during the month
Ending Work in Process Total Units to be accounted for: | 25,000
3,000 | |
28,000 |
After computing the units of completed and transferred out, the equivalent units of each element of cost shall be computed as under:
Equivalent Units: | |||||||
Material | Labour and Overhead | ||||||
% Completion | Units | % Completion | Units | ||||
Units Completed
Ending Work in Process Total Equivalent units | 100%
80% | 25,000
2,400 | 100%
60% | 25,000
1,800 | |||
27,400 | 26,800 | ||||||
Explanation of Solution
The computation of total units completed and transferred out shall be based on the total units in the process during the year. The total units to account for in the process is sum of beginning units of work in process and units started in the process during the year. The Ending units of work in process which is still in process at the end of the year shall be deducted from the total to find out the units completed and transferred out.
For computing the total equivalent units of each element of cost, the units completed and transferred out shall be regarded as 100% complete as regards to all elements. Therefore, the equivalent units of completed units shall be same as that of completed units. The ending work in process inventory is not finished and the degree of completion of the inventory is given as regards to each element. The equivalent units of work in process shall be computed accordingly.
The total equivalent units of each element is sum total of equivalent units of respective element in both completed units and ending work in process units.
Requirement2:
To conclude, it must be said that the equivalent units in each inventory shall multiplied with respective cost per equivalent unit and cost of each element is added up to arrive at the total cost of ending work in process and completed units.
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The Cost of Ending work in process inventory in respect of material, conversion and in total shall be determined.
Answer to Problem 12E
Solution: The
statement showing the cost of ending work in process is as under:
Ending Work in Process (3,000 units) | |||||
Equivalent unit | Cost per EU | Total Cost | |||
Material
Labour Overheads | 2,400
1,800 1800 | 12.5
3.2 6.4 | 30000
5760 11520 | ||
Total cost of Ending Work in process: | 47,280 |
Explanation of Solution
The total cost of ending work in process shall be computed by multiplying the equivalent units of each element in ending work in process by cost per equivalent unit of respective element. The Summation of each element cost is the total cost of ending work in process.
Requirement3:
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The Cost of goods completed and transferred out shall be determined.
Answer to Problem 12E
Solution: The statement showing the cost of units completed and transferred out shall be as under:
Units Completed and Transferred Out (25,000 units) | |||||
Equivalent unit | Cost per EU | Total Cost | |||
Material
Labour Overheads | 25,000
25,000 25000 | 12.5
3.2 6.4 | 312500
80000 160000 | ||
Total cost of Ending Work in process: | 552,500 |
Explanation of Solution
The total cost of units completed and transferred out shall be computed by multiplying the equivalent units of each element in units completed (which is equal to completed units only) by cost per equivalent unit of respective element. The Summation of each element cost is the total cost of ending work in process.
Requirement4:
![Check Mark](/static/check-mark.png)
The reconciliation statement showing the cost to account for and cost accounted for to be reconciled.
Answer to Problem 12E
Solution: The reconciliation statement showing the cost to account for and accounted in ending work in process and completed units is as follows:
RECONCILIATION STATEMENT | |||||
TOTAL COST TO ACCOUNT FOR: | |||||
Total Cost to account for: | 599,780 | ||||
TOTAL COST ACCOUNTED FOR: | |||||
Units Completed and Transferred out (25,000 units) | |||||
Equivalent unit | Cost per EU | Total Cost | |||
Material
Labour Conversion Cost | 25,000
25,000 | 12.5
3.2 | 312500
80000 160000 | ||
25,000 | 6.4 | ||||
Total Cost of Units completed and transferred out: | 552500 | ||||
Ending Work in Process (3,000 units) | |||||
Equivalent unit | Cost per EU | Total Cost | |||
Material
Labour Conversion Cost | 2,400
1,800 1800 | 12.5
3.2 6.4 | 30000
5760 11520 | ||
Total cost of Ending Work in process: | 47,280 | ||||
Total Cost Accounted for: | 599,780 | ||||
Difference (Total cost to account for-Total cost accounted) | Nil |
Explanation of Solution
The total cost to account for is the total cost of beginning work in process and cost added during the period in the process. The total cost accounted for is the cost assigned to ending work in process and units completed and transferred out.
The reconciliation means there shall be not be any difference between the total cost to account for and total accounted in the period.
To conclude, it must be said that the equivalent units in each inventory shall multiplied with respective cost per equivalent unit and cost of each element is added up to arrive at the total cost of ending work in process and completed units.
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Chapter 5 Solutions
Introduction To Managerial Accounting
- Ardt-Barger has a beginning work in process inventory of 5.500 units and transferred in 25,000 units before ending the month with 3.000 u flits that were 100% complete with regard to materials and 80% complete with regard to conversion costs. The cost per unit of material is $5.45, and the cost per unit for conversion is $6.20 per unit, Using the weighted-average method, prepare the companys process cost summary for the month.arrow_forwardDuring March, the following costs were charged to the manufacturing department: $22,500 for materials; $45,625 for labor; and $50,000 for manufacturing overhead. The records show that 40,000 units were completed and transferred, while 10,000 remained in ending inventory. There were 45,000 equivalent units of material and 42,500 units of conversion costs. Using the weighted-average method, prepare the companys process cost summary for the month.arrow_forwardThe Converting Department of Worley Company had 2,400 units in work in process at the beginning of the period, which were 35% complete. During the period, 10,800 units were completed and transferred to the Packing Department. There were 1,900 units in process at the end of the period, which were 60% complete. Direct materials are placed into the process at the beginning of production. Determine the number of equivalent units of production with respect to direct materials and conversion costs.arrow_forward
- Narwhal Swimwear has a beginning work in process inventory of 13,500 units and transferred in 130,000 units before ending the month with 14,000 units that were 100% complete with regard to materials and 30% complete with regard to conversion costs. The cost per unit of material is $5.80 and the cost per unit for conversion is $8.20 per unit. Using the weighted-average method, what is the amount of material and conversion costs assigned to the department for the month?arrow_forwardUsing the same data found in Exercise 6.22, assume the company uses the FIFO method. Required: Prepare a schedule of equivalent units, and compute the unit cost for the month of December. Fordman Company has a product that passes through two processes: Grinding and Polishing. During December, the Grinding Department transferred 20,000 units to the Polishing Department. The cost of the units transferred into the second department was 40,000. Direct materials are added uniformly in the second process. Units are measured the same way in both departments. The second department (Polishing) had the following physical flow schedule for December: Costs in beginning work in process for the Polishing Department were direct materials, 5,000; conversion costs, 6,000; and transferred in, 8,000. Costs added during the month: direct materials, 32,000; conversion costs, 50,000; and transferred in, 40,000.arrow_forwardFordman Company has a product that passes through two processes: Grinding and Polishing. During December, the Grinding Department transferred 20,000 units to the Polishing Department. The cost of the units transferred into the second department was 40,000. Direct materials are added uniformly in the second process. Units are measured the same way in both departments. The second department (Polishing) had the following physical flow schedule for December: Costs in beginning work in process for the Polishing Department were direct materials, 5,000; conversion costs, 6,000; and transferred in, 8,000. Costs added during the month: direct materials, 32,000; conversion costs, 50,000; and transferred in, 40,000. Required: 1. Assuming the use of the weighted average method, prepare a schedule of equivalent units. 2. Compute the unit cost for the month.arrow_forward
- Heap Company manufactures a product that passes through two processes: Fabrication and Assembly. The following information was obtained for the Fabrication Department for September: a. All materials are added at the beginning of the process. b. Beginning work in process had 80,000 units, 30 percent complete with respect to conversion costs. c. Ending work in process had 17,000 units, 25 percent complete with respect to conversion costs. d. Started in process, 95,000 units. Required: 1. Prepare a physical flow schedule. 2. Compute equivalent units using the weighted average method. 3. Compute equivalent units using the FIFO method.arrow_forwardChavez Concrete Inc. has two production departments. Blending had 1,000 units in process at the beginning of the period, two-fifths complete. During the period 7,800 units were received from Mixing, 8,200 units were transferred to the finished goods storeroom, and 600 units were in process at the end of the period, 1/3 complete. The cost of the beginning work in process was: The costs during the month were: 1. Using the data in E5-15, prepare a cost of production summary for the month ended January 31, 2016. 2. Prepare a journal entry to transfer the cost of the completed units from Blending to the finished goods storeroom.arrow_forwardBaxter Company has two processing departments: Assembly and Finishing. A predetermined overhead rate of 10 per DLH is used to assign overhead to production. The company experienced the following operating activity for April: a. Materials issued to Assembly, 24,000 b. Direct labor cost: Assembly, 500 hours at 9.20 per hour; Finishing, 400 hours at 8 per hour c. Overhead applied to production d. Goods transferred to Finishing, 32,500 e. Goods transferred to finished goods warehouse, 20,500 f. Actual overhead incurred, 10,000 Required: 1. Prepare the required journal entries for the preceding transactions. 2. Assuming Assembly and Finishing have no beginning work-in-process inventories, determine the cost of each departments ending work-in-process inventories.arrow_forward
- During December, Krause Chemical Company had the following selected data concerning the manufacture of Xyzine, an industrial cleaner: All materials are added at the beginning of processing in this department, and conversion costs are added uniformly during the process. The beginning work in process inventory had 120 of raw materials and 180 of conversion costs incurred. Materials added during December were 540, and conversion costs of 1,484 were incurred. Krause uses the first-in, first-out (FIFO) process cost method. The equivalent units of production used to compute conversion costs for December were: a. 110 units. b. 104 units. c. 100 units. d. 92 units.arrow_forwardKokomo Kayak Inc. uses the process cost system. The following data, taken from the organizations books, reflect the results of manufacturing operations during the month of March: Production Costs Work in process, beginning of period: Costs incurred during month: Production Data: 18,000 units finished and transferred to stockroom. Work in process, end of period, 3,000 units, two-thirds completed. Required: Prepare a cost of production summary for March.arrow_forwardK-Briggs Company uses the FIFO method to account for the costs of production. For Crushing, the first processing department, the following equivalent units schedule has been prepared: The cost per equivalent unit for the period was as follows: The cost of beginning work in process was direct materials, 40,000; conversion costs, 30,000. Required: 1. Determine the cost of ending work in process and the cost of goods transferred out. 2. Prepare a physical flow schedule.arrow_forward
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