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Question 36 of 100 (1C2-AT18)

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Kimbeth Manufacturing uses a process cost system to manufacture dust density sensors for the mining industry. The following information pertains to operations for the month of May.

                                                                                                Units

Beginning work-in-process inventory, may 1                         16,000

Started in production during may                                           100,000

Completed production during may                                         92,000

Ending work-in-process inventory, may 31                            24,000

The beginning inventory was 60 percent complete for materials and 20 percent complete for conversion costs. The ending inventory was 90 percent complete for materials and 40 percent complete for conversion costs.

Costs pertaining to the month of May are as follows:

• Beginning inventory costs are: materials, $54,560; direct labor, $20,320; and factory overhead, $15,240.
• Costs incurred during May are: materials used, $468,000; direct labor, $182,880; and factory overhead, $391,160.

Using the weighted-average method, the equivalent unit conversion cost for May is

	$6.00.
	$5.65.
	$5.83.
	$6.41.

 

16000  100%   16000

76000  100%    76000 (92000-16000)

24000   40%      9600

 Total             101600

Total cost 20320+15240+182880+391160=609600

unit cost                          609600/101600=6 per unit

No of Units in May = 92,000

Ending WIP Conversion =      9,600 (40% of 24,000)

So, the total EUP for conversion cost =  101,600 units.

Material cost are not part of conversion cost.

Beginning Direct labor   =   20,320

Factory OH     =  15,240

Cost in May Direct Labor = 182,880

Factory OH = 391,160

Total conversion cost = 609,600

So the weighted avg unit cost = 609600/101600 = $6

Thanks everyone !! :)

Equivalent units

Started and completed are 100% completed for conversion cost = 92,000 units

Ending WIP inventory are 40% completed for conversion cost = .40*24000 = 9,600 units

So, total equivalent units for conversion cost are equal to = 92,000+9,600 = 101,600 units.

Total Conversion Costs

Cost of Beginning WIP = DL + OH = 20,320 + 15,240 = $ 35,560.

Cost Incurred = DL + OH = 182,880 + 391,160 = $ 574,040.

Total conversion cost = 35,560 + 574,040 = $ 609,600.

Conversion Cost per Equivalent Unit

Cost /EU = $ 609,600 / 101,600 units = $ 6.00 

first: compute the eqiuvalent units as follows: 92000+40%*24000 = 101600

second: compute total conversion cost used by those equivalent unitsas follows:

beginig [direct labor  20320 + factory overhead 15240] + cost added during the period[ direct labor 182880 +factory overhead 391160]   = 609600

third : compute conversion cost per equiuvalent unit =  609600 / 101600 = $6/unit 

$6.00.

Beginning wip 16000 Start 76000 Enging wip 24000*40/100 = 9600 ------- 101600 -------- Total Labor converstio cost = Beginning $20320+$15240 $35560 Cost of labor $182880+$391160 $574040 ------- $609,600 -------- Conversion cost per unit 609,600/101600 = 6 Answer A is correct