Question

Builder Products, Inc., uses the weighted-average method in its process costing system. It manufactures a caulking compound that goes through three processing stages prior to completion. Information on work in the first department, Cooking, is given below for May: Production data: Pounds in process, May 1; materials 100% complete; conversion 80% complete 10,000 Pounds started into production during May 100,000 Pounds completed and transferred out
1. Compute the equivalent units of production for materials and conversion for May.
2. Compute the cost per equivalent unit for materials and conversion for May.
3. Compute the cost of ending work in process inventory for materials, conversion, and in total for May.
4. Compute the cost of units transferred out to the next department for materials, conversion, and in total for May.
5. Prepare a cost reconciliation report for May..... Please explain how to solve this?

Answer 1

Answer:

1.Total Equivalent Units   Materials   104,000 Conversion    98000

2. Cost per Equivalent Unit   Materials $ 1.5 Conversion $ 1

3. Materials Cost Ending Work in Process 13,500

4. Cost Of Units Transferred Out = $237,500

5. Both calculated and cost accounted are same. Mat. $ 156,000 Conversion $ 98000

Explanation:

The complete data is as follows:

Production data:

Pounds in process, May 1; materials 100% complete; conversion 80% complete 10,000

Pounds started into production during May 100,000

Pounds completed and transferred out ?

Pounds in Process 31 May : Materials 60 % , Conversion 20 % complete  15000

Cost Data

Work In Process May 1

Materials cost $ 1500

Conversion Cost $ 72 00

Cost Added During May

Materials cost $ 154,500

Conversion Cost $ 90,800

Solution

Builder Products, Inc.,

Weighted-Average Method

1. Equivalent Units

Particulars              Units       % of Completion       Equivalent Units

                                        Materials Conversion   Materials Conversion

Transferred Out    95000     100         100             95000      95000

Ending WIP           15000        60          20                9000       3000  

Total Equivalent Units                                              104,000     98000

Transferred Out units are calculated by adding Opening Inventory and production started and subtracting ending inventory units.

Transferred Out units = Opening Inventory+ production started -ending inventory units

Transferred Out units =10,000 + 100,00 - 15000= 95000 units.

2. Cost Per Equivalent Units

                                                       Materials         Conversion

Cost Of Opening Inventory         1500                  7200

Cost Added                                  154500              90800

Total Costs                                   156000             98000

Equivalent Units                          104000              98000

Cost per Equivalent Unit            156000/104000        98000/98000

                                                       $ 1.5                           $1.0

3. Cost of Ending Work In Process  $ 16500

Materials = 9000 * $ 1.5= $ 13500

Conversion = 3000 * $ 1.0=  $3000

We multiply the equivalenr number of units with the cost per unit to find the cost.

4. Cost Of Units Transferred Out = $237,500

Materials == 95 000 * $ 1.5= $ 142,500

Conversion = 95000 * $ 1.0=  $ 95000

5. A Cost Reconciliation Report

                                        Materials              Conversion

Ending WIP                       13500                   3000

Transferred Out                 142500                95000

Total                                 156000                   98000

These calculated costs reconcile with the costs given in the above data.

                                                      Materials         Conversion

Cost Of Opening Inventory         1500                  7200

Cost Added                                  154500              90800

Total Costs                                   156000             98000