Question

A company uses the weighted average method in its processing costing system and a normal costing system in the application of manufacturing overhead to production. MOH costs are applied to production at a rate of​ $3 per direct labor hour. All direct materials are added at the beginning of the production process. The following data relate to the operations of the​ company’s first processing department for August​ 2018:
Beginning WIP 800​ units, 60% complete with respect to conversion costs Units started during the month ​16,000
Ending WIP 300​ units, 40% complete with respect to conversion costs

On July 31st, $1,300 of direct materials and $2,400 of conversion costs were assigned to units in ending inventory. During August, $47,000 of direct materials were requisitioned for production and $215,000 of direct labor costs were incurred. Direct laborers are paid a rate of $10 per direct labor hour.The costs assigned to units in Ending Inventory on August 31st were:

a. $2,899.20
b. $2,737.20
c. $5,961.00
d. $3,873.60

Answer 1

Answer:

a. $2,899.20

Explanation:

Beginning WIP 800​ units, 60% complete with respect to conversion costs Units started during the month ​16,000

Ending WIP 300​ units, 40% complete with respect to conversion costs

Beginning WIP 800 units:

direct materials = $1,300

conversion costs = $2,400

units started = 16,000

units finished = 16,000 + 800 - 300 = 16,500

costs added during the month:

direct materials = $47,000

direct labor = $215,000

OH = 21,500 x $3 = $64,500

total conversion costs = $279,500

ending WIP 300

100% complete for materials

40% complete for conversion costs = 120 EU

total EU:

materials = 16,800

conversion costs = 16,500 + 120 = 16,620

costs per EU:

materials = ($1,300 + $47,000) / 16,800 = $2.88

conversion = ($2,400 + $279,500) / 16,620 = $16.96

ending WIP costs:

300 x $2.88 = $864

120 x $16.96 = $2,035.20

total = $2,899.20