Question

The Matsui Lubricants plant uses the weighted-average method to account for its work-in-process inventories. The accounting records show the following information for a particular day. Beginning WIP inventory Direct materials $ 976 Conversion costs 272 Current period costs Direct materials 11,440 Conversion costs 6,644 Quantity information is obtained from the manufacturing records and includes the following. Beginning inventory 600 units (60% complete as to materials, 53% complete as to conversion) Current period units started 4,000 units Ending inventory 1,200 units (40% complete as to materials, 20% complete as to conversion)
Required:
a. Compute the equivalent units for the materials and conversion cost calculations.
b. Compute the cost per equivalent unit for direct materials and conversion costs.

Answer 1

Answer:

a. The equivalent units for the materials and conversion cost is 3,880 units and 3,640 units respectively.

b. The cost per equivalent unit for direct materials and conversion costs is $3.20 and $1.90 respectively.

Explanation:

a. For computing the equivalent units for conversion costs , first we have to compute the transferred units which is shown below:

= Beginning work in process inventory units + additional units - ending work in process inventory units

= 600 units + 4,000 units - 1,200 units

= 3,400 units

Now the equivalent units for material costs equal to

= Transferred units × percentage of completion + ending work in process inventory units × percentage of completion

= 3,400 units × 100% + 1,200 units ×40%

= 3,400 units + 480 units

= 3,880 units

And, the equivalent units for conversion costs equal to

= Transferred units × percentage of completion + ending work in process inventory units × percentage of completion

= 3,400 units × 100% + 1,200 units × 20%

= 3,400 units + 240 units

= 3,640 units

b. The computation of the cost per equivalent unit is shown below:

For direct materials:

= (Beginning WIP inventory  + Current period cost) ÷ (equivalent units for the materials)

= ($976 + $11,440) ÷ (3,880 units)

= $3.20

For conversion cost:

= (Beginning WIP inventory  + Current period cost) ÷ (equivalent units for the conversion cost)

= ($272 + $6,644) ÷ (3,640 units)

= $1.90