Victory Company uses weighted- average process costing to account for its production costs. Direct labor is added evenly throughout the process. Direct materials are added at the beginning of the process. During November, the company transferred 700,000 units of product to finished goods. At the end of November, the goods in process inventory consists of 180,000 units that are 30% complete with respect to labor. Beginning inventory had $ 420,000 of direct materials and $ 139,000 of direct labor cost. The direct material cost added in November is $ 2,220,000, and the direct labor cost added is $ 3,254,000.

1. Determine the equivalent units of production with respect to
(a) Direct labor and
(b) Direct materials.
2. Compute both the direct labor cost and the direct materials cost per equivalent unit.
3. Compute both direct labor cost and direct materials cost assigned to
(a) Units completed and transferred out,
(b) Ending goods in process inventory.
Analysis Component
4. The company sells and ships all units to customers as soon as they are completed. Assume that an error is made in determining the percentage of completion for units in ending inventory. Instead of being 30% complete with respect to labor, they are actually 60% complete. Write a one-page memo to the plant manager describing how this error affects its November financial statements.
Beginning goods in process consisted of 60,000 units that were 100% complete with respect to direct materials and 80% complete with respect to direct labor. Of the 700,000 units completed, 60,000 were from beginning goods in process and 640,000 units were started and completed during the period.

  • CreatedNovember 29, 2013
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