Question

Hi-Test Company uses the weighted-average method of process costing to assign production costs to its products. Information for September follows. Assume that all materials are added at the beginning of its production process, and that conversion costs are added uniformly throughout the process.

Work in process inventory, September 1 (2,000 units, 100% complete with respect to direct materials, 80% complete with respect to direct labor and overhead; includes \(45,000 of direct materials cost, \)25,600 in direct labor cost, \(30,720 overhead cost)	\)101,320
Units started in September	28,000
Units completed and transferred to finished goods inventory	23,000
Work in process inventory, September 30 (__?__ units, 100% complete with respect to direct materials, 40% complete with respect to direct labor and overhead)	\(
Costs incurred in September
Direct materials	\)375,000
Conversion	$341,000

Compute each of the following, assuming Hi-Test uses the weighted-average method of process costing.

1. The number of physical units that were transferred out and the number that are in ending work in process inventory.

2. The number of equivalent units for materials for the month.

3. The number of equivalent units for conversion for the month.

4. The cost per equivalent unit of materials for the month.

5. The cost per equivalent unit for conversion for the month.

6. The total cost of goods transferred out.

7. The total cost of ending work in process inventory

Short answer

1. Total units accounted for30,000.
2. The number of the equivalent unit for material is30,000.
3. The number of equivalent units for conversion is25,800.
4. The cost per equivalent unit for material is$14.
5. The cost per equivalent unit for conversion is$15.40.
6. The total cost of goods transferred out is $676,200.
7. Total cost of ending work-in-process inventory$\mathbf{\$}\mathbf{141}\mathbf{,}\mathbf{120}$

Step-by-step solution

Definition of Work-in-Process

Work-in-process can be defined as the account that reflects the balance of the semi-finished goods. This account shows as a current asset on the balance sheet of the business entity.

Number of physical units that were transferred out and the number that are in ending work-in-process inventory

Units to account for	Units	Units accounted for	Physical units
Beginning work-in-process inventory	2,000	Units completed and transferred out	23,000
Units started this period	28,000	Ending work-in-process inventory	7,000
Total units to account for	30,000	Total units accounted for	30,000

Number of equivalent units for material for the month

Units accounted for	Material
Units completed and transferred out	23,000
Ending work-in-process inventory	7,000 $\mathbf{(}\mathbf{7}\mathbf{,}\mathbf{000}\mathbf{\times }\mathbf{100}\mathbf{\%}\mathbf{)}$
Total units accounted for	30,000

 Number of equivalent units for conversion for the month

Units accounted for	Conversion
Units completed and transferred out	23,000
Ending work-in-process inventory	2,800 $\mathbf{(}\mathbf{7}\mathbf{,}\mathbf{000}\mathbf{\times }\mathbf{40}\mathbf{\%}\mathbf{)}$
Total units accounted for	25,800

Cost per equivalent unit of material for the month

Particular	Amount/Units
Beginning work-in-process	$45,000
Add: Cost added during the period	375,000
Total cost	$420,000
Equivalent units	30,000 units
Cost per equivalent unit	$14 per unit

Cost per equivalent unit of conversion for the month

Particular	Amount/Units
Beginning work-in-process $\mathbf{(}\mathbf{\$}\mathbf{25}\mathbf{,}\mathbf{600}\mathbf{+}\mathbf{\$}\mathbf{30}\mathbf{,}\mathbf{720}\mathbf{)}$	$56,320
Add: Cost added during the period	341,000
Total cost	$397,320
Equivalent units	25,800
Cost per equivalent unit	$15.40 per unit

Total cost of goods transferred out

Particular	Amount $
Material$\mathbf{(}\mathbf{\$}\mathbf{23}\mathbf{,}\mathbf{000}\mathbf{\times }\mathbf{\$}\mathbf{14}\mathbf{)}$	$322,000
Conversion$\mathbf{(}\mathbf{\$}\mathbf{23}\mathbf{,}\mathbf{000}\mathbf{\times }\mathbf{\$}\mathbf{15}\mathbf{.}\mathbf{4}\mathbf{)}$	354,200
Total cost of goods transferred out	$676,200

Total cost of ending work-in-process inventory

Particular	Amount $
Material$\mathbf{(}\mathbf{\$}\mathbf{7}\mathbf{,}\mathbf{000}\mathbf{\times }\mathbf{\$}\mathbf{14}\mathbf{)}$	$98,000
Conversion$\mathbf{(}\mathbf{\$}\mathbf{2}\mathbf{,}\mathbf{800}\mathbf{\times }\mathbf{\$}\mathbf{15}\mathbf{.}\mathbf{4}\mathbf{)}$	43,120
Total cost of ending work-in-process inventory	$141,120