Grand Lips produces a lip balm used for cold-weather sports. The balm is manufac

Question

Grand Lips produces a lip balm used for cold-weather sports. The balm is manufactured in a single processing department. No lip balm was in process on May 31, and Grand started production on 20,400 lip balm tubes during June. Direct materials are added at the beginning of the process, but conversion costs are incurred evenly throughout the process. Completed production for June totaled 15,200 units. The June 30 work in process was 40% of the way through the production process. Direct materials costing $4,080 were placed in production during June, and direct labor of $3,315 and manufacturing overhead of $1,005 were assigned to the process Read the requirements

Explanation / Answer

1. Flow Diagram Conversion cost Added evently throughout the process Start ( Direct Material Added) Completion 15200 unit Completed & Transferred 5200 Unit Started but not Completed in WIP 2. Computation of equivalent unit of Production Particulars Physical units Material Conversion Completed & Transferred Out 15200 15200 15200 Ending WIP 5200 5200 2080 Total Physical Unit Accounted for 20400 Total and equivalent units 20400 17280 2.. Computation of Cost per equivalent unit of Production Particulars Material Conversion Opening WIP $0 $0 Cost Added during June $4,080 $4,320 Total cost to be accounted for $4,080 $4,320 Equivalent units of production 20400 17280 Cost per Equivalent unit $0.20 $0.25 3. Cost Assignment Particulars Material Conversion Total (a)Completed & Transferred Out 15200*($0.20+0.25) $6,840.00 $0.00 Ending WIP, June30 Direct Material 5200*$0.20 $1,040.00 Conversion Cost 2080*$0.25 $520.00 (b) Total Cost of Ending WIP as on Jun30 $1,560.00 Total Cost Accounted For $8,400.00 (4) WIP Particular Amount Particular Amount Bal June-1 $0.00 Transferred out $6,840.00 Direct Material $4,080.00 Direct Labour $3,315.00 Balance $1,560.00 Manufacturing Overhead $1,005.00 Total $8,400.00 $8,400.00

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