Question

5,000 units (100% complete as to material, 55% complete as to labor) with a cost of $124,800 materials and $104,500 conversion. 58,000 units were started into production during the month with material costs of $1,537,000 and $2,124,375 of conversion costs. The ending inventory of 6,000 chairs was 100% complete as to materials and 40% complete as to labor. Everglades uses first-in, first-out (FIFO) costing.
a. Compute the equivalent units of production for each input.
b. Compute the cost per unit.
c. Compute the cost transferred out to finished goods.
d. Compute the ending work-in-process inventory balance.

Answer 1

Answer and Explanation:

The computation is shown below:

a. The equivalent units of production for each one is shown below:

But before that first we have to determine the started units i,e shown below;

= 58,000 units - 6,000 units

= 52,000 units

For material,

= (0% × 5,000 units) + 52,000 + (6,000 units × 100%)

= 58,000 units

For conversion,

= (45% × 5,000 units) + 52,000 + (6,000 units × 40%)

= 2,250 units + 52,000 units + 2,400 units

= 56,650 units

b. The cost per unit is shown below:

For material

= $1,537,000 ÷ 58,000 units

= $26.50

For conversion

= $2,124,375 ÷ 56,650 units

= $27.50

c. The cost transferred out is

Beginning work in process              $229,300   ($124,800 + $104,500)

Add: Conversion                               $84,375    (2,250 × $37.50)

Amount                                              $313,675

Add: completed & transferred units $3,328,000  {52,000 × ($26.50 + $2.70)}

Total                                                    $3,641,675

d. The ending work in process inventory balance is

Material                $159,000   ($6,000 × $26.50)

Add: Conversion  $90,000   ($2,400 × $37.50)

Total                      $249,000

We simply do the above calculations.