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A company uses the weighted average method for inventory costing. At the start of a period the production department had 22,000 units in beginning Work in Process inventory which were 41% complete; the department completed and transferred 166,000 units. At the end of the period, 23,000 units were in the ending Work in Process inventory and are 76% complete. The production department had conversion costs in the beginning goods is process inventory of $100,000 and total conversion costs added during the period are $726,850. Compute the conversion cost per equivalent unit.
Multiple Choice
$4.57.
$4.51.
$4.15.
$4.36.
$4.72.
Option(B). $4.51 is the correct answer.
Weighted Average Method-Equivalent production | ||||
Unit Reconcilation | ||||
Beginning Work in Process Inventory, May 1 | 22,000 | |||
Started this period | 167,000 | |||
Cost Charged to account for: | 189,000 | |||
Completed and Transferred out | 166,000 | |||
Ending Work in Process Inventory, May 31 | 23,000 | |||
Total units accounted for: | 189,000 | |||
Equivalent units of production | ||||
a. | Units | %Conversion | EUP -Conversion | |
Completed and Transferred out | 166,000 | 100% | 166,000 | |
Ending WIP | 23,000 | 76% | 17,480 | |
Total UNITS | 189,000 | 183,480 | ||
Cost per Equivalent unit of production | EUP -Conversion | |||
b. | Beginning WIP | 22,000 | $ 100,000 | |
Started | 167,000 | $ 726,850 | ||
Total Costs | 189,000 | Costs | $ 826,850 | |
Div, Equivalent units | EUP | 183,480 units | ||
Cost per Equivalent unit of production | $ 4.51 | |||
*During computation of Equiavlent units:
*Beginning WIP is irrelevant in this case.
*Completed and Transferred = 100%;
*Ending WIP = Given%.
*The conversion cost per equivalent unit = $4.51.