Moravia Company processes and packages cream cheese. The following data have bee

Question

Moravia Company processes and packages cream cheese. The following data have been compiled for the month of April. Conversion activity occurs uniformly throughout the production process. Prepare schedules to accomplish each of the following process-costing steps for the month of April. Use the weighted-average method of process costing. Analysis of physical flow of units. Calculation of equivalent units. Computation of unit costs. Cost of units completed and transferred out and cost of units in ending work in process.

Explanation / Answer

1. Analysis of physical flow of units:

Every unit that we worked on at all this period was either in beginning inventory or we started it this period. Conversely, every unit that we worked on was either finished or it is in ending inventory.

These two must be equal

So, there are 100,000 units started, 30,000 of them are not completed. 70,000 units must, therefore have been started and completed this period. In addition, 80,000 units were completed this period, but 10,000 of them were started in the previous period (they were in beginning inventory). Hence there were 70,000 units started and completed this period. This equality follows directly from the previous one above.

2. Cost of equivalent Unit;

3. Computation of Unit costs:

To compute the cost of goods transferred out, we take the number of units transferred out (notice that they are all COMPLETE) and multiply by the total Cost per Equivalent Unit = $3.81.

This gives us 80,000 * $3.81 = $304,800.

4. Cost of Units completed and transferred out and cost of units in ending work in process.

Costs Direct Materials Conversion Equivalent Units 220000 162900 Cost per Equiv. Unit 110000 90000 2 1.81

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