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The Assembly Department uses a process cost accounting system and a weighted-ave

ID: 2333407 • Letter: T

Question

The Assembly Department uses a process cost accounting system and a weighted-average cost flow assumption. The department adds materials at the beginning of the process and incurs conversion costs uniformly throughout the process. During July, $190,000 of materials costs and $137,100 in conversion costs were charged to the department. The beginning work in process inventory was $93,000 on July 1, comprised of $80,000 of material costs and $13,000 of conversion costs. Other data for the month of July are as follows: (40% complete) 25,000 units 70,000 units 30,000 units Beginning work in process inventory, 7/1 Units completed and transferred out (30% complete) Ending work in process inventory, 7/31 Instructions Answer the following questions and show computations to support your answers. 1. How many physical units have to be accounted for in July? 2. What are the equivalent units of production for materials and for conversion costs for the month of July? 3. What is the total cost assigned to the 70,000 units that were transferred out of the process in July? 4. What is the total cost of the July 31 inventory?

Explanation / Answer

Requirement 1

Units

Reconciliation of Units

A

Opening WIP

                    25,000

B

Introduced

                    75,000

C=A+B Units to account for

TOTAL

                 100,000

D

Transferred

                    70,000

E=C-D

Closing WIP

                    30,000

Answer-: Units to Account for 100000

Requirement 2

Statement of Equivalent Units

Material

Conversion Cost

Units

Complete %

Equivalent units

Complete %

Equivalent units

Transferred

                      70,000

100%

               70,000

100%

           70,000

Closing WIP

                      30,000

100%

               30,000

30%

             9,000

Total

                    100,000

Total

             100,000

Total

           79,000

Equivalent units

Material----------- 100000 Units

Conversion cost---- 79000 Units

Requirement 3

Working – Cost per Equivalent unit

Cost per Equivalent Units

COST

Material

Conversion Cost

TOTAL

Beginning WIP Inventory Cost

$          80,000.00

$              13,000.00

$            93,000.00

Cost incurred during period

$        190,000.00

$            137,100.00

$          327,100.00

Total Cost to be accounted for

$        270,000.00

$            150,100.00

$          420,100.00

Total Equivalent Units

                 100,000

                       79,000

Cost per Equivalent Units

$                2.7000

$                    1.9000

Statement of cost

Cost

Equivalent Cost/unit

Transferred

Units

Cost Allocated

Material

$   2.70

                      70,000

$ 189,000.00

Conversion Cost

$    1.90

                      70,000

$ 133,000.00

TOTAL

$ 322,000.00

Answer-: Cost assigned to goods transferred out -- $ 322,000.

Requirement 4

Statement of cost

Cost

Equivalent Cost/unit

Ending WIP

Units

Cost Allocated

Material

$ 2.70

                    30,000

$ 81,000.00

Conversion Cost

$ 1.90

                      9,000

$ 1,170.00

TOTAL

$          404,170.00

TOTAL

$ 82,170.00

Answer-: Cost assigned to July 31 Inventory -- $ 82,170.

Notes

  

Units

Reconciliation of Units

A

Opening WIP

                    25,000

B

Introduced

                    75,000

C=A+B Units to account for

TOTAL

                 100,000

D

Transferred

                    70,000

E=C-D

Closing WIP

                    30,000