Question

The ledger of American Company has the following work in process account.

Work In Process - Painting
5/01	Balance	3,590	5/31	Transferred out	?
5/31	Materials	5,160
5/31	Labor	2,530
5/31	Overhead	1,380
5/31	Balance	?

Production records show that there were 400 units in the beginning inventory, 30% complete, 1,600 units started, and 1,700 units transferred out.

The beginning work in process had materials cost of $2,040 and conversion costs of $1,550.

The units in ending inventory were 40% complete.

Materials are entered at the beginning of the painting process.

Instructions

(a) How many units are in process at May 31?

(b) What is the unit materials cost for May?

(c) What is the unit conversion cost for May?

(d) What is the total cost of units transferred out in May?

(e) What is the cost of the May 31 inventory?

(a)

BEG Work In Process  (May01)
Started into production
Total Units to be accounted for
LESS   ?
END Work In Process  (May31)

                                                                               (b)                               (c)

	Equivalent Units
	Materials	Conversion Costs
Units transferred out
Work in process (May31)
300 units  @  100%
300 units  @   ?
Equivalent Units

Note that “Materials” are ALL added at the beginning therefore it is 100%

                                                                               (b)                               (c)

	Direct Materials $	$ Conversion Costs
Work in process  (May01)
Cost added (see ledger T-acct *)
Total Costs (add the 2 above)
Divided by Equiv Units (above)
Result is the “Unit Costs”

Keep Material and Labor separate.  Remember to add in the Overhead costs

To the Labor amount so you get the “Conversion Cost” amount

(d)  Transferred out = (1,700 per problem  x  ??)  =  _____________________

(e)

Work in Process:
Materials   (what  x  what)
Conversion Costs   (what  x  what)
Total

Answer 1

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American Company
Answer 1	Whole Units
Beginning WIP Inventory	400.00
Add: Units Started	1,600.00
Less: Units Transferred	1,700.00
Units ending in WIP Inventory	300.00

Workings for Answer 2 and 3	Whole Units	% Materials	EUP- Materials	% Conversion	EUP- Conversion
Units Transferred	1,700.00	100%	1,700.00	100%	1,700.00
Units ending in WIP Inventory	300.00	100%	300.00	40%	120.00
Equivalent Units of production	2,000.00		2,000.00		1,820.00

Answer 2 and 3	EUP- Materials	EUP- Conversion	Total Cost
Costs of opening WIP	2,040.00	1,550.00	3,590.00
Costs incurred during the month	5,160.00	3,910.00	9,070.00
Total Costs incurred	7,200.00	5,460.00	12,660.00
Equivalent Units of production	2,000.00	1,820.00
Cost per Equivalent Unit	3.60	3.00
Answer 4	EUP	Cost per EUP	Total Cost
Total costs transferred out
Direct Materials	1,700.00	3.600	6,120.00
Conversion	1,700.00	3.000	5,100.00
Total costs transferred out			11,220.00
Answer 5
Costs of ending work in process	EUP	Cost per EUP	Total Cost
Direct Materials	300.00	3.600	1,080.00
Conversion	120.00	3.000	360.00
Total costs of ending work in process			1,440.00