Wing Fung Ltd is a manufacturer of photocopier with the same manufacturing proce
ID: 2709599 • Letter: W
Question
Wing Fung Ltd is a manufacturer of photocopier with the same manufacturing process for its product. Every effort is made to ensure that each photocopier is identical and meets the contractor's performance specifications. The process-costing-sytstem at thje plant has a asingle ndirect-cost category (direct materials) and a single indirect-ocst category (conversion cots). All photocopiers pass through two departments: the Assembly Department and the Testing Department. Direct materials are added at the beginning of the process in Assembly. Conversion costs are added evenly during then Assembly Department process. When the Assembly Department finishs work on neach photocopier, oit nis immediately transferred to Testing. Wing Fung Ltd uses the weighted-average method of process costing. Data for the Assembly Department for October 20x4 are: Physical Units Direct Materials Conversion Costs
Work in process, 1 October (A) 40 $460,0000 $120,000 Started during October 2010 160 Completed during October 2010 180 Work in process, 31 October (B) 20 Total costs added during October 2010 $2,000,000 $935,000 A) Degree of completion: direct materials, ?%, converstion costs 60% B) Degree of completion: dircect materials ?%, conversion costs 70% Required:
a) For each cost category, compute equivalent iunits in the Assembly Department. Show physical units in the first column of your schedule.
b) For each cost category, calculate cot p[er equivalent inut.
c) Summarize totral Assembly Department costs for October 20x4, and assign total costs to uinits completed and transferred out and to units in ending work in process.
Explanation / Answer
Answer:
Wing Fung Ltd uses the weighted-average method of process costing.
As per weighted average method, Closing WIP is valued at Average Production Cost.
Average Production Cost is the aggregated cost of opening WIP and Current Production Cost.
So,
Average Production Cost = Cost of Opening WIP + Current Production Cost
A) Degree of completion: direct materials, 100%, Conversion costs 60%
Statement of Equivalent Production
Output
Units
Equivalent Percentage
Equivalent Units
Transferred to next process
180
100%
180
Closing Work-in-process
20
60%
12
Total Equivalent Production Units
192
Statement of Cost per Equivalent Unit
Particulars
Calculation
Cost
Opening Work in process (Oct 1)
(Direct Material + Conversion Cost)
$460,000 + $120,000)
$580,000
Cost incurred/added during October 2010
(Direct Material + Conversion Cost)
$2,000,000 + $935,000
$2,935,000
Total Cost
$3,515,000
Cost per Equivalent Unit = Total Cost / Equivalent Unit = $3,515,000 / 192 = $18,307.292 (approx.)
Statement of Evaluation
Particulars
Equivalent Units
Cost Per Equivalent Units
Amount
1
Transferred to next process
180
$18,307.292
$3,295,312
2
Closing Work In process
12
$18,307.292
$219,688
Total Cost
$3,515,000
B) Degree of completion: direct materials, 100%, Conversion costs 70%
Statement of Equivalent Production
Output
Units
Equivalent Percentage
Equivalent Units
Transferred to next process
180
100%
180
Closing Work-in-process
20
70%
14
Total Equivalent Production Units
194
Statement of Cost per Equivalent Unit
Particulars
Calculation
Cost
Opening Work in process (Oct 1)
(Direct Material + Conversion Cost)
$460,000 + $120,000)
$580,000
Cost incurred/added during October 2010
(Direct Material + Conversion Cost)
$2,000,000 + $935,000
$2,935,000
Total Cost
$3,515,000
Cost per Equivalent Unit = Total Cost / Equivalent Unit = $3,515,000 / 194 = $18,118.557 (approx.)
Statement of Evaluation
Particulars
Equivalent Units
Cost Per Equivalent Units
Amount
1
Transferred to next process
180
$18,118.557
$3,261,340
2
Closing Work In process
14
$18,118.557
$253,660
Total Cost
$3,515,000
Output
Units
Equivalent Percentage
Equivalent Units
Transferred to next process
180
100%
180
Closing Work-in-process
20
60%
12
Total Equivalent Production Units
192
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