Question

Oslo Company produces large quantities of a standardized product. The following information is available for its production activities for May.

Units		Costs
Beginning work in process inventory	4,000	Beginning work-in-process inventory
Started	12,000	Direct material	2,880
Ending work-in-process inventory	3,000	Conversion	5,358	\(8,238
Status of ending work-in-process inventory		Direct material added		197,120
Material – percent complete	100%	Direct labor added		123,680
Conversion – percent complete	25%	Overhead applied (90% of direct labor)		111,312
		Total cost to account for		\)440,350
		Ending work in process inventory		$50,610

Prepare a process cost summary report for this company showing costs charged to production, unit cost information, equivalent units of production, cost per EUP, and its cost assignment and reconciliation. Use the weighted-average method.

Short answer

Cost per equivalent unit:

Material:$12.5

Conversion:$17.48

Step-by-step solution

Definition of Process Cost Summary

Process cost summary can be defined as a report prepared by the management accountant that provides a summary of the cost incurred by the department, units produced by the department, and the cost allocated to each unit produced.

Process cost summary report

1. Total cost to account for: $440,350.
2. Unit information

Units to account for:		Units accounted for:
Beginning work-in-process	4,000	Completed and transferred out	13,000
Unit started this period	12,000	Ending work-in-process	3,000
Total units to account for	16,000	Total units accounted for	16,000

Equivalent unit of production

	Direct material	Conversion
Units completed and transferred out	13,000	13,000
Units of ending work-in-process
Direct material (100% of 3,000)	3,000
Conversion (25% of 3,000)		750
Equivalent units of production	16,000	13,750

Cost per equivalent units of production

	Direct material	Conversion
Cost of beginning work-in-process	$2,880	$5,358
Cost incurred this period	197,120	234,992
Total cost	$200,000	$240,350
Equivalent units of production	16,000	13,750
Cost per equivalent unit	$12.5	$17.48

Working note:

Conversion cost incurred during this period

$\begin{array}{c}\mathbf{Conversion}\mathbf{}\mathbf{cost}\mathbf{=}\mathbf{(}\mathbf{\$}\mathbf{123}\mathbf{,}\mathbf{680}\mathbf{+}\mathbf{\$}\mathbf{111}\mathbf{,}\mathbf{312}\mathbf{)}\\ \mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{234}\mathbf{,}\mathbf{992}\end{array}$

3.Cost assignment and reconciliation

Cost transferred out (Cost of goods manufactured):
Direct material$\mathbf{(}\mathbf{13}\mathbf{,}\mathbf{000}\mathbf{\times }\mathbf{\$}\mathbf{12}\mathbf{.}\mathbf{5}\mathbf{)}$	$162,500
Conversion $\mathbf{(}\mathbf{13}\mathbf{,}\mathbf{000}\mathbf{\times }\mathbf{\$}\mathbf{17}\mathbf{.}\mathbf{48}\mathbf{)}$		$227,240
Cost of ending work-in-process:
Direct material (3,000 units @ $12.5)	37,500
Conversion (750 units @17.48)		13,110
Total cost accounted for	$200,000	$240,350