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Exercise 3-3 (Video) The ledger of American Company has the following work in process account
Exercise 3-3 (Video)
The ledger of American Company has the following work in process account.
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Work in Process—Painting |
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| 5/1 | Balance | 3,690 | 5/31 | Transferred out | ? |
| 5/31 | Materials | 5,820 | |||
| 5/31 | Labor | 4,106 | |||
| 5/31 | Overhead | 1,280 | |||
| 5/31 | Balance | ? | |||
Production records show that there were 500 units in the beginning inventory, 30% complete, 1,700 units started, and 1,400 units transferred out. The beginning work in process had materials cost of $2,540 and conversion costs of $1,150. The units in ending inventory were 40% complete. Materials are entered at the beginning of the painting process.
How many units are in process at May 31?
What is the unit materials cost for May? (Round unit cost to 2 decimal places, e.g. 2.25.)
What is the unit conversion cost for May? (Round unit cost to 2 decimal places, e.g. 2.25.)
What is the total cost of units transferred out in May?
What is the cost of the May 31 inventory?
Expert Solution
| Work in process, May 1 | 500 | |
| Started into production | 1,700 | |
| Total units to be accounted for | 2,200 | |
| Less: Transferred out | 1,400 | |
| Work in process, May 31 | 800 |
[(500 + 1,700) – 1,400 = 800]
[(Beg. WIP + Started into production) – Transferred out = End. WIP]
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Equivalent Units
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Materials
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| Units transferred out | 1,400 | |
| Work in process, May 31 | ||
| 800 × 100% | 800 | |
| 2,200 | ||
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Direct Materials
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| Work in process, May 1 | $2,540 | |
| Costs added | 5,820 | |
| Total costs | $8,360 | |
| Equivalent units | 2,200 | |
| Unit costs | $3.80 |
(DM: ($2,540 + $5,820) ÷ (1,400 + 800) = $3.80)
(DM: (Beg. WIP costs + DM costs added) ÷ (Units transferred out + Units in end. WIP) = DM cost/unit)
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Equivalent Units
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Conversion Costs
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| Units transferred out | 1,400 | ||
| Work in process, May 31 | |||
| 800 × 40% | 320 | ||
| 1,720 | |||
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Conversion Costs
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| Work in process, May 1 | $1,150 | ||
| Costs added | 5,386 | * | |
| Total costs | $6,536 | ||
| Equivalent units | 1,720 | ||
| Unit costs | $3.80 | ||
*$4,106 + $1,280 = 5,386
(CC: ($1,150 + ($4,106 + $1,280)) ÷ (1,400 + (800 x 40%)) = $3.80)
(CC: (Beg. WIP costs + (DL + OH costs added)) ÷ (Units transferred out + Equiv. units in end. WIP) = CC/unit)
| Work in process | ||
| Materials (800 × $3.80) | $3,040 | |
| Conversion costs (320 × $3.80) | 1,216 | |
| $4,256 |
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