Question

159 Process Costing and Hybrid Product-Costing Systems Chapter 4 OConnect All applicable Problems are available in Connect. Problems Timing Technology, Inc. manufactures timing devices. During 20x1, 900,000 units were completed and transferred to finished-goods inventory. On December 31, 20x1 there were 300,000 units in work in process. These units were 50 percent complete as to conversion and 100 percent complete as to direct material. Finished-goods inventory consisted of 200,000 units. Materials are added to production at the beginning of the manufacturing process, and overhead is applied to each product at the rate of 60 percent of direct-labor costs. There was no finished-goods inventory on January 1, 20x1. A review of the inven- tory cost records disclosed the following information: I Problem 4-25 Step-by-Step Weighted- Average Process Costing (LO 4-3, 4-4, 4-5) 3. Cost per equivalent unit, total: $4.77 Ex Costs Labor Materials Units Work in process, January 1, 20x1 (80% complete as to conversion) $ 315,000 $ 200,000 200,000 1,000,000 Units started in production $1,300,000 Direct-material costs $1,995.000 Direct-labor costs Prepare schedules as of December 31, 20x1, to compute the following: Required: 1. Physical flow of units. 2. Equivalent units of production using the weighted-average method. 3. Costs per equivalent unit for material and conversion. 3. Cost of the December 31, 20x1, finished-goods inventory and work-in-process inventory. (CMA, adapted)

I am studying process costing for managerial accounting. I have the answers for 1 and 2. I have the first column for question 3( direct material) but am stuck on how to calculate the conversion column. Thank you!

Answer 1

Equivalent units of production (Weighted-average method)

Particulars	Total units	Direct material	Direct labor	Overhead
Finished goods	900,000	900,000	900,000	900,000
Closing work in progress	300,000	300,000	150,000	150,000
Total	1,200,000	1,200,000	1,050,000	1,050,000

	Direct labor	Overhead 60% of direct labor	Total
Work in progress, Jan 1	315,000	189,000	504,000
Cost incurred during the month	1,995,000	1,197,000	3,192,000

Particulars	Direct material	Conversion	Total
Work in progress	200,000	504,000	704,000
Cost incurred during the month	1,300,000	3,192,000	4,492,000
Total cost	1,500,000	3,696,000	5,196,000
Equivalent units	1,200,000	1,050,000
Cost per equivalent unit	$1.25	$3.52	$4.77

　

Cost of goods completed & transferred: [900,000 * $4.77] = $4,293,000

Cost of WIP: [$5,196,000 - $4,293,000] = $903,000