Lake Surf Company uses an automated process to clean and polish its merchandise

Question

Lake Surf Company uses an automated process to clean and polish its merchandise items. For March 2017, the company conducted the following activities: Units Beginning work in process inventory 3,000 Items [Direct material - 100%] [Conversion costs - 25%] Units placed in production 12,000 units Unites Completed 9,000 units Ending work in process inventory 5,000 units [Direct material - 100%] [Conversion costs - 60%] Costs Cost of beginning work in process Direct materials $ 2,100 Conversion costs $ 485 $ 2,585 Direct material costs, current $ 9,000 Conversion costs, current $ 10,045 Required: Using the weighted average method, determine the following: 1a. the number of equivalent units 1b. cost per equivalent unit 1c. ending work in process inventory 1d. cost of normal and abnormal spoilage 1e. cost of goods completed and transferred out during March, 2017

Explanation / Answer

1a. the number of equivalent units

Materials = 15000 Units

Conversion = 13000 Units

1b. cost per equivalent unit

1c. ending work in process inventory

= 5000 * 0.74 + 3000 * 0.81

= 6130

1d. cost of abnormal spoilage

= 1000 Units * ( 0.74 + 0.81 )

= 1550

1e. cost of goods completed and transferred out during March, 2017

= 9000 Units * ( 0.74 + 0.81 )

= 13950

Physical      Materials        Conversion Units    Units     %    Units     % Abnormal loss 1000 1000 100 1000 Units completed 9000 9000 100 9000 100 Ending Inventory 5000 5000 100 3000 60 Equivalent Units 15000 13000

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