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The Blending Department of Luongo Company has the following cost and production data for the month of April.
| Work in process, April 1 | ||
| Direct materials: 100% complete | $116,000 | |
| Conversion costs: 20% complete | 81,200 | |
| Cost of work in process, April 1 | $197,200 | |
| Costs incurred during production in April | ||
| Direct materials | $928,000 | |
| Conversion costs | 423,400 | |
| Costs incurred in April | $1,351,400 |
Units transferred out totaled 19,720. Ending work in process was 1,160 units that are 100% complete as to materials and 40% complete as to conversion costs.
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Expert Answer
Solution:
It is assumed that Weighted Average method is used in this problem.
1) Equivalent units of production for (1) materials and (2) conversion costs for the month of April
| Units | % Material | EUP Material | % Conversion | EUP Conversion | |
| Units transferred out | 19720 | 100% | 19720 | 100% | 19720 |
| Ending Work In Process Inventory | 1160 | 100% | 1160 | 40% | 464 |
| Total Units | 20880 | 20880 | 20184 |
a. Equivalent Units of Production for Material = 20,880 Units
b. Equivalent Units of Production for Conversion = 20,184 Units
2) Compute the unit cost of equivalent unit of production
| Material | Conversion | |
| Cost of Beginning Work In Process | $116,000 | $81,200 |
| Cost incurred during the month | $928,000 | $423,400 |
| Total Costs | $1,044,000 | $504,600 |
| – Equivalent Units of production | 20880 | 20184 |
| Cost per equivalent unit of production | $50.00 | $25.00 |
Cost per equivalent unit of production
For Material = $50 per EUP
For Conversion = $25 per EUP
3) Cost to be assigned to the units transferred out and in ending work in process
| Total Costs accounted for: | |||
| Cost of units transferred out | EUP | Cost per EUP | Total Cost |
| Direct materials | 19720 | $50.00 | $986,000 |
| Conversion | 19720 | $25.00 | $493,000 |
| Total costs transferred out | $1,479,000 | ||
| Cost of Ending Work in process | |||
| Direct materials | 1160 | $50.00 | $58,000 |
| Conversion | 464 | $25.00 | $11,600 |
| Total Cost of Ending Work in process | $69,600 |
Cost assigned to Units transferred out = $1,479,000
Cost assigned to Ending Work in process = $69,600
