Question

Victory Company uses weighted-average process costing to account for its production costs. Direct labor is added evenly throughout the process. Direct materials are added at the beginning of the process. During November, the company transferred 700,000 units of product to finished goods. At the end of November, the goods in process inventory consists of 180,000 units that are 30% complete with respect to labor. Beginning inventory dat $420,000 of direct materials and $139,000 of direct labor cost. The direct material cost added in November is $2,220,000 and the direct labor cost added is $3,245,000.

1. Determine the equivalent units of production with respect to (a) direct labor and (b) direct materials.

2. Compute both the labor cost and the direct materials cost per equivalent unit.

3. Compute both direct labor cost and direct materials cost assigned to (a) units completed and tansferred out and (b) ending goods in process inventory.

Answer 1

Equivalent units of production (EUP)- weighted average method
	Units	% Materials	EUP- Materials	% Labor	EUP- Labor
						Units completed and transferred out	700,000	100%	700,000	100%	700,000
Ending goods in process - units	180,000	100%	180,000	30%	54,000
Total units	880,000		880,000		754,000
Cost per equivalent unit of production			Materials		Labor
						Cost of beginning goods in process			$420,000		$139,000
Costs incurred this period			2,220,000		3,245,000
						Total costs		Costs	$2,640,000	Costs	$3,384,000
÷ Equivalent units of production		EUP	880,000	EUP	754,000
						Cost per equivalent unit of production (rounded to 2 decimals)			$3.00		$4.50
Cost of units transferred out:	EUP	Cost per EUP	Total cost
Direct materials	700,000	$3.00	2,100,000
Direct labor	700,000	$4.50	3,150,000
Total costs transferred out				$5,250,000
Costs of ending goods in process	EUP	Cost per EUP	Total cost
Direct materials	180,000	$3.00	540,000
Direct labor	54,000	$4.50	243,000
Total cost of ending goods in process				$783,000
Total costs accounted for				$6,033,000