Question: The Assembly Department uses a process cost accounting system. The department adds materials and incurs conversion costs uniformly throughout the process. During May, $200,000 of
The Assembly Department uses a process cost accounting system. The department adds materials and incurs conversion costs uniformly throughout the process. During May, $200,000 of materials costs and $95,000 in conversion costs were charged to the department. The beginning Work in Process inventory was $63,000 on May 1, comprised of $40,000 of materials costs and $23,000 of conversion costs. The company employs the FIFO method of process costing.
Other data for the month of May are as follows:
Beginning Work in Process inventory, 5/125,000 units(40% complete)
Units completed and transferred out50,000 units
Ending Work in Process inventory, 5/3130,000 units(30% complete)
a.How many physical units have to be accounted for in May? (4 marks)
b.What are the equivalent units of production for materials and for conversion costs for the month of May? (4 marks)
c.What is the total cost assigned to the 50,000 units that were transferred out of the process in May? (4 marks)
d.What is the total cost of the May 31 inventory? (3 marks)
Solutions:
a)Work in process, May 1 25,000
Units started in production55,000
Units accounted for80,000
Units transferred out50,000
Work in process, May 3130,000
Units accounted for80,000
b)Equivalent units of production:Equivalent Units
Physical UnitsMaterialsConversion Costs
Work in process, May 1 25,00015,00015,000(25,000 x .60)
Transferred out25,00025,00025,000
Work in process, May 3130,0009,000 9,000 (30,000 x .30)
Total80,00049,00049,000
c)Materials cost per unit =$4.08($200,000 49,000 units)
Conversion cost per unit = 1.94($95,000 49,000 units)
Total unit cost$6.02
Total cost assigned to units transferred out:
Work in process, May 1$ 63,000
Costs to complete beginning Work in Process:
15,000 x $6.02 = 90,300
Total 153,300
Units started and completed (25,000 x $6.02) 150,500
Total costs transferred out$303,800
d)Work in process, May 31
Materials (9,000 $4.08)$36,720
Conversion costs (9,000 $1.94)17,460
Total costs$54,180
Explain in a step by step fashion from questions b to d where they figured out the solutions from.
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