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12 December, 17:44

Adam Plastics, Inc., manufactures plastic moldings for car seats. Its costing system utilizes two cost categories, direct materials and conversion costs. Direct materials are added at the beginning of production. Conversion costs are allocated evenly throughout production.

Data for February 2012 are:Work in process, beginning inventory, 200 units. Units started during February 600 unitsWork in process, ending inventory, 100 units30% complete as to conversion costs100% complete as to materialsCosts:Work in process, beginning inventory:Direct materials $200,000Conversion costs $200,000Direct materials costs added during February $2,000,000Conversion costs added during February $2,500,000What is the cost assigned to Ending WIP (Ending Inventory) in February? a. $393,162.50b. $4,900,000c. $385,958.90d. None of the above

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  1. 12 December, 18:01
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    c. $385,958.90

    Explanation:

    Step 1 Determine the Total Cost Incurred for Both materials and Conversion

    Raw Materials

    Opening Work In Process $200,000

    Add Cost Added during the year $2,000,000

    Total $2,200,000

    Conversion

    Opening Work In Process $200,000

    Add Cost Added during the year $2,500,000

    Total $2,700,000

    Step 2 Determine the total equivalent units for materials and conversion

    Materials

    Closing work in process 100 * 100% = 100

    Completed and Transferred (600+200-100) * 100% = 700

    Total = 800

    Conversion

    Closing work in process 100 * 30% = 30

    Completed and Transferred (600+200-100) * 100% = 700

    Total = 730

    Step 3 Determine equivalent cost per unit of materials and conversion costs

    Materials = $2,200,000/800 = $2,750

    Conversion = $2,700,000/730 = $3,699

    Step 4 Determine the cost assigned to Ending WIP

    Materials ($2,750*100) = $275,000

    Conversion Cost ($3,699*30) = $110,970

    Total = $385970
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