alt Abraham Company uses process costing to account for its production costs.Con
ID: 2529996 • Letter: A
Question
alt Abraham Company uses process costing to account for its production costs.Conversion is added evel throughout the process. Direct materials are added at the beginning of the process. During Septembei e: tnit production department transferred 80,000 units of product to finished goods. Beginning work in proc consisted of 2,000 units that were 100% complete with respect to direct materials and 85% complete respect to conversion. Of the units completed, 2,000 were from beginning work in process and 78,000 Ur were started and completed during the period. Beginning work in process had $58,000 of direct matena and $86,400 of conversion cost. At the end of September, the work in process inventory consists of 8 units that are 25% complete with respect to conversion. The direct materials cost added in September $712,000, and conversion cost added is $1,980,000. The company uses the weighted-average method 5 ,00 Required 1. Determine the equivalent units of production with respect to (a) conversion and (b) direct materials n cost 2. Compute both the conversion cost and the direct materials cost per equivalent unit. 5.20 3. Compute both conversion cost and direct materials cost assigned to (a) units completed and transfert out and (b) ending work in process inventory.Explanation / Answer
Question 1
Opening Stock:
Completion with respect to Direct Material = 0 (All units of opening stock are already complete with respect to opening stock)
Completion with respect to Conversion = 2000 X (100% - 85%) = 300
Current Production:
Completion with respect to Direct Material = 78,000
Completion with respect to Conversion = 78,000
Closing WIP:
Completion with respect to Direct Material = 8,000
Completion with respect to Conversion = 8,000 X 25% = 2,000
Answer:
a. Total Equivalent Production with respect to Direct Material = 78,000 + 8,000 = 86,000
b. Total Equivalent Production with respect to Conversion = 300 + 78,000 + 2,000 = 80,300
Question 2
Since the Company uses weighted average method, the cost per equivalent unit can be computed as:
Total Costs/(Total Equivalent Units+Stock)
Total Material Cost = 712,000 + 58,000 =770,000
Total Conversion Cost = 1,980,000 + 86,400 = 2,066,400
Answer
Material Cost per Equivalent Unit = 770,000/86,000 = 8.95
Conversion Cost per Equivalent Unit = 2,066,400/80,300 = 25.73
Question 3
Material Cost Assigned to Completed Units = 78000 X8.95 = 698,372.09
Conversion Cost Assigned to Completed Units = 78000 X 25.73 = 2,007,213
Material Cost Assigned to WIP = 8000 X8.95 = 71,627.91
Conversion Cost Assigned to WIP = 8000 X 25.73 = 205,868
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