Tempe Manufacturing Company makes a single product that is produced on a continu

Question

Tempe Manufacturing Company makes a single product that is produced on a continuous basis in one department. All materials are added at the beginning of production. The total cost per equivalent unit in process in March was $5.80, consisting of $4.20 for materials and $1.60 for conversion. During the month, 9,000 units of product were transferred to finished goods inventory; on March 31, 3,500 units were in process, 10 percent converted. The company uses weighted average costing.

(a) Determine the cost of goods transferred to finished goods inventory.

(b) Determine the cost of the ending work-in-process inventory.

(c) What was the total cost of the beginning work-in-process inventory plus the current manufacturing costs?

Explanation / Answer

Quantity Schedule

Opening Units                              =      Nil

Units Introduced = 9000+3500        = 12500

Total Units accounted in = 0+12500 = 12500

Transferred to finished goods            = 9000

Closing WIP                                   = 3500

Calculation of equivalent units

For Completed Units

Direct Material = 9000 * 100% = 9000 units

Conversion Cost = 9000 * 100% = 9000 units

For Closing WIP

Direct Material = 3500*100% = 3500 units ( Since it is written that all material is used in the beginning)

Conversion Cost = 3500 * 10% = 350 units

Equivalent units material = 9000 + 3500 = 12500 units

Equivalent units conversio cost = 9000 + 350 = 9350 units

a) Cost of goods transferred = 9000 * 4.20 + 3500 * 4.20 = $ 52,500

b) Cost of ending work in progress = 3500 * 1.60 + 350 * 1.60 = $ 6,160

c) Since opening WIP is NIL, Hence total cost of begining WIP is Nil

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