Swedish Navy Company manufactures wristwatches on an assembly line. The work in
ID: 2372655 • Letter: S
Question
Swedish Navy Company manufactures wristwatches on an assembly line. The work in process inventory as of March 1 consisted of 1,000 watches that were complete as to materials and 75% complete as to labor and overhead. The March 1 work in process costs were as follows:
Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,000
Labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000
Overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,000
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $18,000
During the month, 10,000 units were started and 9,500 units were completed. The 1,500 units of ending inventory were complete as to materials and 25% were complete as to labor and overhead.
The costs for March were as follows:
Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 61,000
Labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000
Overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48,000
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $129,000
Calculate:
a. Equivalent units for material, labor, and overhead, using the average cost method
b. Unit costs for materials, labor, and overhead
c. Cost of the units completed and transferred
d. Detailed cost of the ending inventory
e. Total of all costs accounted for
Explanation / Answer
a)Equivalent units for material = 11000
labor = 9500+1500*0.25 = 9875
overhead = 9500+1500*0.25 = 9875
b) unit cost material = 66000/11000 = 6/unit
labor = 25000/9875 = 2.53/unit
overhead = 56000/9875 = 5.67/unit
c) completed and transferred cost = 9500(6+2.53+5.67) = 134900
d) detailed cost of ending inventory material = 1500*6 = 12000
labor = 375*2.53 = 948.75
overhead = 375*5.67 = 2126.25
e) total of all costs = 134900+12000+988.75+2126.25 = 147000
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