Chapter 5, Problem 17E

a.

To determine

Determine the month’s unit cost in finishing.

Explanation of Solution

Equivalent units for production: The activity of a processing department in terms of fully completed units is known as equivalent units. It includes the completed units of direct materials and conversion cost of beginning work in process, units completed and transferred out, and ending work in process.

Unit Cost of Production: The cost production derived in terms of corresponding units of production is called unit cost of production.

Determine the month’s unit cost.

	Production Cost
Cost Elements	Beginning Work In Process	Cost for Month	Total	Equivalent unit	Unit Cost
Materials	$600	4,800	5,400	15,000	0.36
Labor	$1,500	15,000	16,500	15,000	1.10
Factory overhead	$900	9,600	10,500	15,000	0.70
Total	$3,000	29,400	32,400		2.16

Table (1)

Working Note:

(1) Compute equivalent units.

Particulars	Units
Units completed and transferred	13,000
3,000 units in process, two-third completed	2,000
Equivalent units of production for the month	15,000

Table (2)

b.

To determine

Compute the total cost of the products transferred to finished goods.

Explanation of Solution

Compute the total cost of the products transferred to finished goods.

Particulars	Units Completed
Cost in Assembly (2)	78,000
Cost in Fishing (3)	28,080
Cost of goods transferred to finished goods	106,080

Table (3)

(2) Compute cost in assembly.

$\begin{array}{c}\text{Cost in assembly}=\left(\begin{array}{l}\left(\begin{array}{l}\text{Transferred units }\\ \text{to finished goods}\end{array}\right)\\ \times \text{Unit cost}\end{array}\right)\\ =13,000\times \$6\\ =\$78,000\end{array}$

(3) Compute cost in fishing.

$\begin{array}{c}\text{Cost in blending}=\left(\begin{array}{l}\left(\begin{array}{l}\text{Transferred units }\\ \text{to finished goods}\end{array}\right)\\ \times \text{Unit cost}\end{array}\right)\\ =13,000\times \$2.16\\ =\$28,080\end{array}$

Compute unit cost.

$\begin{array}{c}\text{Unit cost}=\frac{\left(\begin{array}{l}\text{Cost of goods received }\\ \text{from Mixing}\end{array}\right)}{\text{Units received from mixing}}\\ =\frac{\$84,000}{14,000}\\ =\$6\text{ per unit}\end{array}$

c.

To determine

Compute the total cost of the ending work in process inventory in blending.

Explanation of Solution

Compute the total cost of the ending work in process inventory in blending.

Particulars	Units Completed
Cost in Assembly (4)	18,000
Cost in Fishing:
Material (5)	720
Labor (6)	2,200
Factory overhead (7)	1,400
Cost of ending work in process inventory	22,320

Table (4)

Working Note:

(4) Compute cost in assembly.

$\begin{array}{c}\text{Cost in assembly}=\left(\begin{array}{l}\left(\begin{array}{l}\text{Units in process}\\ \text{at the end of the period}\end{array}\right)\\ \times \text{Unit cost}\end{array}\right)\\ =3,000\times \$6\\ =\$18,000\end{array}$

(5) Compute the cost in fishing (material).

$\begin{array}{c}\text{Cost in fishing}\left(\text{Material}\right)=\left(\begin{array}{l}\left(\begin{array}{l}\text{Unit in process}\\ \text{at the end of period}\end{array}\right)\\ \times \text{End of the period}\\ \times \text{Unit cost of material}\end{array}\right)\\ =\left(3,000\times \frac{2}{3}\times \$0.36\right)\\ =\$720\end{array}$

(6) Compute the cost in fishing (labor).

$\begin{array}{c}\text{Cost in fishing}\left(\text{Labor}\right)=\left(\begin{array}{l}\left(\begin{array}{l}\text{Unit in process}\\ \text{at the end of period}\end{array}\right)\\ \times \text{End of the period}\\ \times \text{Unit cost of labor}\end{array}\right)\\ =\left(3,000\times \frac{2}{3}\times \$1.10\right)\\ =\$2,200\end{array}$

(7) Compute the cost in fishing (factory overhead).

$\begin{array}{c}\text{Factory overhead}=\left(\begin{array}{l}\left(\begin{array}{l}\text{Unit in process}\\ \text{at the end of the period}\end{array}\right)\\ \times \text{End of the period}\\ \times \left(\begin{array}{l}\text{Unit cost of }\\ \text{factory overhead}\end{array}\right)\end{array}\right)\\ =\left(3,00\times \frac{2}{3}\times \$0.70\right)\\ =\$1,400\end{array}$