Question

PA12. LO 5.4Complete this production cost report:

Answer 1

Using weighted average method

Statement of equivalent units

                                                   Material    Conversion

                                                    Units         Units

Units transferred out                   70,000       70,000

Add: Closing work-in-progress   25,000       6,250

Average divisor                             95,000    76,250

                        Computation of cost per unit

                                                              Material   Conversion

                                                                   $               $

Cost of beginning work-in-progress   3,500      16,000

Cost added                                           25,000   45,000

Total cost                                               28,500   61,000

Material cost per unit = $28,500

                                         95,000 units

                                    = $0.30 per unit

Conversion cost per unit = $61,000

                                            76,250 units    

                                          = $0.80 per unit

 Value of units transferred out

  Material = 70,000 x $0.30  = $21,000

  Conversion = 70,000 x $0.80 = $56,000

  Value of closing work-in-progress

  Material = 25,000 x $0.30 = $7,500

  Conversion = 6,250 x $0.80 = $5,000

Explanation:

In this case, we will obtain the average divisor by adding the ending work-in-progress to the units transferred out. Then, we will determine the total cost of material and conversion ,which is the aggregate of cost of opening work-in -progress and cost added during the year. We also need to obtain the unit cost of material and conversion, which is total cost of material and conversion divided by the average divisor.  

Finally, we will value the units transferred out and ending work-in-progress at unit cost of material and conversion.