Question

The production department described in Exercise 16-8 had \(850,368 of direct materials and \)649,296 of conversion costs charged to it during April. Also, its beginning inventory of \(167,066 consists of \)118,472 of direct materials cost and $48,594 of conversion costs.

1. Compute the direct materials cost and the conversion cost per equivalent unit for the department.

2. Using the weighted-average method, assign April’s costs to the department’s output—specifically, its units transferred to finished goods and its ending work in process inventory.

Short answer

1. Cost per equivalent unit:

Direct material:$2.65

Conversion cost:$2.15

2. Cost allocated to ending work-in-process inventory: $226,730.

Step-by-step solution

Definition of Finished Goods

Finished goods can be defined as all those goods held by the business entity that has passed all the processes of the product and is now ready for sale. These goods are reported as a resource of the business.

Direct material and conversion cost per equivalent unit

Direct material:

Particular	Amount $
Direct material incurred	$850,368
Add: beginning direct material	118,472
Total cost	$968,840
Equivalent units	365,600
Cost per equivalent unit	$2.65

Conversion Cost:

Particular	Amount $
Conversion cost incurred	$649,296
Add: beginning conversion cost	48,594
Total cost	$697,890
Equivalent units	324,600
Cost per equivalent unit	$2.15

Assigning cost to department output

Particular	Amount $
Cost of goods finished and transferred out	$1,440,000
Cost of ending work-in-process	226,730
Total cost	$1,666,730