Chapter 3, Problem 20E

1.

To determine

To compute: Number of transferred out goods and work in process (ending).

Explanation of Solution

Number of transferred out goods is 23,000 units.

Hence, number of transferred out goods is 23,000 units.

Given,
Work in process (opening) is 2,000 units.
New started units this month are 28,000 units.
Number of transferred out goods is 23,000.

Formula to calculate work in process (ending),

$\text{Work in process }\left(\text{ending}\right)=\left(\begin{array}{l}\text{Work}\text{in}\text{process}\text{(opening)}\\ +\text{New}\text{started}\text{during}\text{the}\text{month}\\ -\text{Number of transferred out goods}\end{array}\right)$

Substitute 2,000 units for work in process (opening), 28,000 units for new started this month and 23,000 units fornumber of transferred out goods.

$\begin{array}{c}\text{Work in process }\left(\text{ending}\right)=2,000+28,000-23,000\\ =7,000\end{array}$

Hence, work in process (ending) is 7,000.

2.

To determine

To compute: Equivalent unit of production according to weighted average method for direct material cost.

Explanation of Solution

Given,
Completed goods are 23,000 units.
Work in progress (ending) is 7,000 units.

Formula to calculate equivalent unit of production (direct material),

$\text{Equivalent}\text{unit}\text{of}\text{production}\text{(direct}\text{material)}=\left(\begin{array}{l}\text{Completed}\text{goods}\\ +\text{Work}\text{in}\text{progress}\text{(ending)}\end{array}\right)$

Substitute 23,000 units for completed goods and 7,000 units for work in progress (ending).

$\begin{array}{c}\text{Equivalent}\text{unit}\text{of}\text{production}\text{(direct}\text{material)}=23,000+7,000\\ =30,000\end{array}$

Hence, equivalent unit of production (direct material) is 30,000 units.

Working notes:

Calculation for work in progress (ending),

$\begin{array}{c}\text{Work}\text{in}\text{progress}\text{(ending)}=\text{Unfinsihed}\text{goods}\times \text{Finished}\text{percentage}\\ =7,000\times \frac{100}{100}\\ =7,000\end{array}$

3.

To determine

To compute: Equivalent unit of production according to weighted average method for conversion cost.

Explanation of Solution

Given,
Completed goods are 23,000 units.
Work in progress (ending) is 2,800 units.

Formula to calculate equivalent unit of production (conversion),

$\text{Equivalent}\text{unit}\text{of}\text{production}\text{(conversion)}=\left(\begin{array}{l}\text{Completed}\text{goods}\\ +\text{Work}\text{in}\text{progress}\text{(ending)}\end{array}\right)$

Substitute 23,000 units for completed goods and 2,800 units for work in progress (ending).

$\begin{array}{c}\text{Equivalent}\text{Unit}\text{of}\text{Production}=23,000+2,800\\ =25,800\end{array}$

Hence, equivalent unit of production (conversion) is 25,800 units.

Working notes:

Calculation for work in progress,

$\begin{array}{c}\text{Work}\text{in}\text{progress}\text{(ending)}=\text{Unfinsihed}\text{goods}\times \text{Finished}\text{percentage}\\ =7,\text{000}\times \frac{40}{100}\\ =2,800\end{array}$

4.

To determine

To compute: Cost per equivalent unit of production for direct material.

Explanation of Solution

Given,
Total direct material cost is $420,000.
Total EUP (direct material) is 30,000 units.

Formula to calculate cost per equivalent unit of production,

$\text{Cost}\text{per}\text{EUP}\text{(direct}\text{material)}=\frac{\text{Total}\text{direct}\text{material}\text{cost}}{\text{Total}\text{EUP}\text{(direct}\text{material)}}$

Substitute, $420,000 for total direct material cost and 30,000 units for total EUP (direct material) in the above equation.

$\begin{array}{c}\text{Cost}\text{per}\text{EUP}\text{(direct}\text{material)}=\frac{\$420,000}{30,000}\\ =\$14\end{array}$

Hence, cost per EUP (direct material) is $14.

Working notes:

Calculation for total direct material cost,

$\begin{array}{c}\text{Total}\text{direct}\text{material}\text{cost}=\left(\begin{array}{l}\text{Direct}\text{material}\text{in}\text{the}\text{opening}\text{inventory}\\ +\text{Direct}\text{matrial}\text{used}\text{during}\text{the}\text{month}\end{array}\right)\\ =\$45,000+\$375,000\\ =\$420,000\end{array}$

5.

To determine

To compute: Cost per equivalent unit of production for conversion.

Explanation of Solution

Given,
Total conversion cost is $397,320.
Total EUP (conversion) is 25,800 units.

Formula to calculate cost per equivalent unit of production,

$\text{Cost}\text{per}\text{EUP}\text{(conversion)}=\frac{\text{Total}\text{direct}\text{material}\text{cost}}{\text{Total}\text{EUP}\text{(conversion)}}$

Substitute $397,320 for total conversion cost and 25,800 units for total EUP (conversion).

$\begin{array}{c}\text{Cost}\text{per}\text{EUP}\text{(conversion)}=\frac{\$397,320}{25,800}\\ =\$15.4\end{array}$

Hence, cost per EUP (conversion) is $15.4.

Working notes:

Calculation for total direct material cost,

$\begin{array}{c}\text{Total}\text{Conversion}\text{Cost}=\left(\begin{array}{l}\text{Conversion}\text{Cost}\text{In}\text{the}\text{opening}\text{inventory}\\ +\text{Conversion}\text{Cost}\text{used}\text{during}\text{the}\text{month}\end{array}\right)\\ =\$56,320+\$341,000\\ =\$397,320\end{array}$

6.

To determine

To compute: Cost of goods transferred out.

Explanation of Solution

Given,
Direct material cost for completed goods is $322,000.
Conversion cost for completed goods is $354,200.

Formula to calculate the cost of goods transferred out,

$\text{Cost}\text{of}\text{transferrred}\text{out}\text{goods}=\left(\begin{array}{l}\text{Direct}\text{material}\text{cost}\text{for}\text{completed}\text{goods}\\ +\text{Conversion}\text{cost}\text{for}\text{completed}\text{goods}\end{array}\right)$

Substitute, $322,000 for direct material cost for completed goods and $354,200 for conversion cost for completed goods in the above equation.

$\begin{array}{c}\text{Cost}\text{of}\text{transferrred}\text{out}\text{goods}=\$322,000+\$354,200\\ =\$676,200\end{array}$

Hence, cost of unit completed is $676,200.

Working notes:

Calculation for direct material cost for completed goods,

$\begin{array}{c}\text{Direct}\text{material}\text{cost}\text{for}\text{completed}\text{goods}=\left(\begin{array}{l}\text{Completed}\text{goods}\\ \times \text{Cost}\text{per}\text{EUP}\text{(direct}\text{material)}\end{array}\right)\\ =23,000\times \$14\\ =\$322,000\end{array}$

Calculation for conversion cost for completed goods,

$\begin{array}{c}\text{Conversion}\text{cost}\text{for}\text{completed}\text{goods}=\left(\begin{array}{l}\text{Completed}\text{goods}\\ \times \text{Cost}\text{per}\text{EUP}\text{(conversion)}\end{array}\right)\\ =23,000\times \$15.4\\ =\$354,200\end{array}$

7.

To determine

To compute: Cost of work in process (end).

Explanation of Solution

Given,
Direct material cost for work in process (end) is $98,000.
Conversion cost for work in process (end) is $43,120.

Formula to calculate the cost of work in process (end),

$\text{Cost}\text{of}\text{work in process }\left(\text{end}\right)=\left(\begin{array}{l}\text{Direct}\text{material}\text{cost}\text{for}\text{completed}\text{goods}\\ +\text{Conversion}\text{cost}\text{for}\text{completed}\text{goods}\end{array}\right)$

Substitute $98,000 for direct material cost for work in process (end) and $43,120 for conversion cost for work in process (end).

$\begin{array}{c}\text{Cost}\text{of}\text{work in process }\left(\text{end}\right)=\$98,000+\$43,120\\ =\$141,120\end{array}$

Hence, cost of work in process (end) is $141,120.

Working notes:

Calculation for direct material cost for work in process (end),

$\begin{array}{c}\left[\begin{array}{l}\text{Direct}\text{material}\text{cost}\text{for}\\ \text{work in process }\left(\text{end}\right)\end{array}\right]=\left[\begin{array}{l}\text{EUP}\text{(direct}\text{material)}\text{for}\text{work in process }\left(\text{end}\right)\\ \times \text{Cost}\text{per}\text{EUP}\text{(direct}\text{material)}\end{array}\right]\\ =7,000\times \$14\\ =\$98,000\end{array}$

Calculation for conversion cost for work in process (end),

$\begin{array}{c}\left[\begin{array}{l}\text{Conversion}\text{cost}\text{for}\\ \text{work in process }\left(\text{end}\right)\end{array}\right]=\left[\begin{array}{l}\text{EUP}\text{(conversion)}\text{for}\text{work in process }\left(\text{end}\right)\\ \times \text{Cost}\text{per}\text{EUP}\text{(conversion)}\end{array}\right]\\ =2,800\times \$15.4\\ =\$43,120\end{array}$