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Durango Corporation uses the weighted-average method in its process costing system
Durango Corporation uses the weighted-average method in its process costing system. In January, the beginning inventory in the first processing department consisted of 600 units. The costs and percentage completion of these units in the beginning inventory were:
Materials cost $2,020; percentage of completion 50%
Conversion costs $2,900; percentage of completion 10%
A total of 7,800 units were started and 7,000 units were transferred to the second processing department during the month. The following costs were incurred in the first processing department during the month:
Materials costs $200,000
Conversion costs $322,900
The ending inventory was 55% complete with respect to materials and 60% complete with respect to conversion costs.
a. How many units are in the ending work in process inventory in the first processing department at January 31?
b. What are the equivalent units for materials costs for the month in the first processing department?
c. What is the cost per equivalent unit for materials costs for the month in the first processing department?
Expert Solution
Question A
Units in Ending Inventory as on January 31 = Units in Beginning Inventory as on Jan 01 + Units Started during the January - Units Completed and Transferred Out during the January
Units in Beginning Inventory as on January 01 = 600 Units
Units Started during the January = 7,800 Units
Units Completed and Transferred Out during the January = 7,000 Units
Units in Ending Work in Process Inventory as on January 31 = 600 + 7,800 - 7,000
Units in Ending Inventory as on January 31 = 1,400 Units
Question B
Calculation of Equivalent Annual Units for Materials Cost using Weighted Average Method
| Particulars | Units | % Materials | EUP Materials |
| Units Completed and Transferred Out | 7,000 | 100% | 7,000 |
| Ending Work in Process Inventory Units | 1,400 | 55% | 770 |
| Total | 8,400 | 7,770 |
EUP stands for Equivalent Annual Units.
EUP Materials = Units * % Materials Cost
Question C
Cost per Equivalent Unit for Materials Cost
| Particulars | Amount |
| Cost of Beginning Work in Process Inventory | 2,020 |
| Add: Cost added during the Month of January | 200,000 |
| Total Cost for Materials | 202,020 |
| ÷ Equivalent Annual Units for Materials | 7,770 |
| Cost per Equivalent Unit for Material | 26 |
Cost per Equivalent Unit for Material Cost = $ 26
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