Department F had 4,000 units in work in Process that were 40% completed at the b

Question

Department F had 4,000 units in work in Process that were 40% completed at the beginning of the period at a cost of $13,300. of the $13,300, $7,800 was for material and $5,500 was for conversion costs. 14,000 units of direct materials were added during the period at a cost of $26,400. 15,000 units were completed during the penod, and 3,000 units were 75% completed at the end of the penod. All materials are added at the beginning of the process. Direct labor was $31,700 and factory overhead was $19,600. If the average cost method is used, the conversion cost per unit (to the nearest cent) would be a. $3.29 Ob. $3.79 O c. $5.16 Od. $3.16 Previous Next me Remaining: 2:09:14 All work saved Submit Test for Grading Type here to search

Explanation / Answer

Solution:

Weighted Average (Average Cost) Method

Physical Units Count

Under this method the percentage completion done in the Beginning Inventory is ignored while calculating the equivalent completed units during the current period. Beginning Inventory Units are treated as fresh units introduced for production.

Cost Accounted for:

- The cost of opening work-in-progress and cost of the current period are aggregated and the aggregate cost is divided by output in terms of completed equivalent units.

- The units of Beginning Inventory of WIP and their cost are taken in full under this method

Ending Inventory

The Ending Inventory of WIP is valued at total cost i.e. Cost added during the month/period and Cost of Beginning WIP.

First of all we will calculate the Equivalent Units of Production For Conversion

Total Units

% Coversion

Conversion - Equivalent Unit of Production

Completed Units during the period

15000

100%

15000

Ending Work In Process

3000

75%

2250

18000

17250

Equivalent Units of Production for conversion = 17,250

Conversion Cost per Unit

Conversion Cost

Beginning Inventory

$5,500

Cost added during the period

Direct Labor

$31,700

Factory Overhead

$19,600

Total Conversion Cost for the period

$56,800

Equivalent Units of Production - Conversion

17,250 Units

Conversion Cost per Unit ($56,800 / 17,250 Units)

$3.29

The correct option is a. $3.29

Total Units

% Coversion

Conversion - Equivalent Unit of Production

Completed Units during the period

15000

100%

15000

Ending Work In Process

3000

75%

2250

18000

17250

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