Equivalent Units and Product Cost AssignmentWeighted Average

Equivalent Units and Product Cost Assignment-Weighted Average Method In its first month of operations (May 2016), Allred Company\'s Department 1 incurred charges of $144,000 for direct materials (45,000 units), $77.400 for direct labor, and $27,000 for manufacturing overhead. At month end, 42,500 units had been finished and transferred out. Those remaining were finished with respect to material but only 40% finished with respect to conversion. Assuming Allred uses the weighted average method and that materials are added at the beginning of the process and conversion occurs evenly, compute the following a. The equivalent units for material and conversion. b. The cost per equivalent unit for material and conversion. c. The total cost assigned to the units transferred out. d. The total cost assigned to the ending inventory. e. Prove that your solutions to requirements (c) and (d) sum to the total costs to be accounted for. Round average cost per equivalent unit to two decimal places, if applicable. Round other answers to the nearest whole number, when appropriate. Allred Company Department 1 Flow of Units and Equivalent Units Calculation Equivalent Units 96 Work done Direct Materials %work Done Conversion Costs Complete/Transferred 0% 0% Ending Inventory Total

Solution

Physical units Equivalent Units % work done DM % work done CC Completed / Transferred 42500 100 42500 100 42500 Ending Inventory 2500 100 2500 40 1000 Total 45000 43500 Product Cost Report DM CC Beginning Inventory 0 0 Current 144000 104400 Total Cost to Account for 144000 104400 Total Equivalent Units 45000 43500 Average cost / equivalent units $3.2 $2.4 Completed / Transferred: Direct Material 42500*3.2= $136000 Conversion Costs 42500*2.4= $102000 Cost of Goods Manufactured $238000 Ending Inventory: DM 2500*3.2=8000 CC 1000*2.4=2400 Total cost of Inventory $10400