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21 November, 18:36

PA5.

LO 5.3Materials are added at the beginning of a production process, and ending work in process inventory is 30% complete with respect to conversion costs. Use the information provided to complete a production cost report using the weighted-average method.

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  1. 21 November, 18:51
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    Using weighted average method

    Statement of equivalent units

    Material Conversion

    Units Units

    Units transferred out 19,000 19,000

    Add: Closing work-in-progress 6,000 1,800

    Average divisor 25,000 20,800

    Computation of cost per unit

    Material Conversion

    $ $

    Cost of beginning work-in-progress 10,000 19,000

    Cost added 50,000 112,248

    Total cost 60,000 131,248

    Material cost per unit = $60,000

    25,000 units

    = $2.40 per unit

    Conversion cost per unit = $131,248

    20,800 units

    = $6.31 per unit

    Value of units transferred out

    Material = 19,000 x $2.40 = $45,600

    Conversion = 19,000 x $6.31 = $119,890

    Value of closing work-in-progress

    Material = 6,000 x $2.40 = $14,400

    Conversion = 1,800 x $6.31 = 11,358

    Explanation:

    In this case, we need to prepare statement of equivalent units in order to ascertain the average divisor. The average divisor is the sum of units transferred out and closing work-in-progress. Then, we will obtain the total cost of material and conversion, which is the aggregate of cost of opening work-in-progress and cost of units added. We will also calculate the cost per unit, which is total cost of material and conversion divided by average divisor. Finally, the units transferred and ending work-in-progress will be valued at unit cost of material and conversion.
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