Fanning Company had 250 units of product in its work in process inventory at the

Question

Fanning Company had 250 units of product in its work in process inventory at the beginning of the period and started 1,900 additional units during the period. At the end of the period, 780 units were in work in process inventory. The ending work in process inventory was estimated to be 60 percent complete. The cost of work in process inventory at the beginning of the period was $6,460, and $23,316 of product costs was added during the period.

Required:

A) Calculate the number of equivalent units of production.

B) Calculate the product cost per equivalent unit.

C) Calculate the total cost allocated between the ending Work in Process Inventory and Finished Goods Inventory accounts.

Explanation / Answer

A)

Equivalent units of production

= Units companted and transferred out + (Units in ending inventory x Percent complete)

= (250 + 1900 - 780) + (780 x 60%)

= 1,838

B)

Product cost per equivalent unit

= (Cost of beginnig work in process + Product costs added during the period)/Number of equivalent units

= ($6460 + $23316)/1838

= $16.20

C)

Total cost of finished goods inventory

= Number of units completed and transferred out x Cost per equivalent unit

= (250+1900-780) x $16.20

= $22,194

Total cost of ending work in process inventory

= Number of equivalent units in ending work in process inventory x Cost per equivalent unit

= (780 x 60%) x $16.20

= $7582

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