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6) Miller Corporation manufactures a product for which materials are added at the beginning of the manufacturing process. This means 100% for materials at all times once started. A review of the companys inventory and cost records for the most recently completed year revealed the following information: Units Materials Conversion Work in process, January 1 (80% 100,000 $100,000 $157,500 complete with respect to conversion costs) Units started into production 500,000 Costs added during the year $650,000 $997,500 Units completed during the year 450,000 The company uses the weighted average cost method in its process costing system. The ending inventory is 50% complete with respect to conversion costs. Required: A. Compute the Equivalent units of production and Cost per equivalent unit for Matls & Conversion costs: (4 pts) Materials Conversion Units transferred to the next department Ending work in process inventory: Materials: Conversion: Equivalent units of production Materials Conversion Cost of beginning work in process inventory Costs added during the period Total cost Equivalent units of production

Answer 1

Under weighted average method, equivalent units are to be calculated only for units completed & transferred out and units lying as ending work in process as it is assumed that the units once entered into the process become integral part of total units and no segregation between units transferred from beginning work in process and introduced during current process. Conversion cost includes Labor + Overheads. So, % of completion of beginning Work in Process Inventory doesn't affect the calculation of equivalent units of production. Physical Units of production: Units in beginning inventory Add: Units started during current period Less: Units completed and transferred out Units in ending inventory 100,000 500,000 -450,000 150,000 A) Materials Conversion 450,000 450,000 (450000 units x 100%; 450000 units x 100%] Units transferred to next department Ending work in process inventory: Materials Conversion Equivalent units of production 150,000 [150000 x 100%] 75,000 (150000 x 50%] 525,000 600,000

Cost per equivalent units of production Cost of beginning work in process Cost added during the period Total Costs Equivalent units of Production (EUP) Cost per Equivalent units of Production Materials Conversion $100,000 $157,500 $650,000 $997,500 $750,000 $1,155,000 600,000 525,000 [As computed EUP schedule presented above] $1.25 $2.20 [$750000 / 600000 units = $1.25; $1155000 / 525000 units = $2.20] B) Materials Conversion Total Units completed and transferred out: Units transferred to next department 450,000 450,000 Cost per equivalent unit $1.25 $2.20 Cost of units completed & tranferred out $562,500 $990,000 $1,552,500 ($562500 + $990000] [Materials = 450000 units x $1.25 = $562500; Conversion = 450000 units x $2.20 = $990000] C) Materials Conversion Total Ending work in process inventory: Equivalent units of production 150,000 75,000 Cost per equivalent unit $1.25 $2.20 Cost of ending work in process inventory $187,500 $165,000 $352,500 ($187500 + $165000] [Materials = 150000 units x $1.25 = $187500; Conversion = 75000 units x $2.20 = $165000]