Tavia Limited manufactures a plastic gasket that is used in

Tavia Limited manufactures a plastic gasket that is used in automobile engines. The gaskets go through three processing departments: Mixing, Forming, and Stamping. The company\'s accountant (who is very inexperienced) has prepared a summary of production and costs for the Forming Department for October as follows: Work in process inventory, October 1 (10,200 units materials 100% complete, conversion 7/8 complete) Costs transferred in from the Mixing Department Material added during October (added when processing is 50% complete in the Forming Department) Conversion costs added during October $40,494* 144,726 71,956 201,564 Total departmental costs $458,740 Units completed and transferred to the Stamping $458,740 Department (130,000 units at $3.52877 each) Work in process inventory, October 31 (9,300 units conversion 2/5 complete) $458,740 Total departmental costs assigned Consists of cost transferred in, $14,076, materials cost, $7,344; and conversion costs, $19,074 After mulling over the data above, Tavia\'s president commented, \"1 can\'t understand what\'s happening here. Despite a concentrated effort at cost reduction, our unit cost actually went up in the Forming Department last month. With that kind of per

Solution

Calculation of equivalent units of production Physical Units % Completed with respect to Transferred in cost Equivalent Units for Costs Transferred in % Completed with respect to Material cost Equivalent Units for Material Costs % Completed with respect to Conversion costs Equivalent Units for Conversion Costs Units completed and transferred 130000 100% 130000 100% 130000 100% 130000 Units in ending work in process 9300 100% 9300 100% 9300 40% 3720 Equivalent Units of production 139300 139300 133720 Calculation of cost per equivalent unit Transferred in Material Conversion Beginning Work in process $14,076 $7,344 $19,074 Cost added during the period $144,726 $71,956 $201,564 Total Cost to account for $158,802 $79,300 $220,638 / Equivalent units of production 139300 139300 133720 Cost per equivalent unit $1.14 $0.57 $1.65 Calculation of cost of ending work in process Transferred in Material Conversion Total Cost of ending work in process = 9300 EU * $1.14 $10,602.00 $10,602.00 = 9300 EU * $0.57 $5,294.26 $5,294.26 = 3720 EU * $1.65 $6,138.00 $6,138.00 Cost of ending work in process $22,034.26 Calculation of cost of units completed and transferred out Transferred in Material Conversion Total Cost of units completed and transferred out = 130000 EU * $1.14 $148,200.00 $148,200.00 = 130000 EU * $0.57 $74,005.74 $74,005.74 = 130000 EU * $1.65 $214,500.00 $214,500.00 Cost of units completed and transferred out $436,705.74