Question

The Finishing Department started the month with 500 units in process, received 2,000 units from the Assembly Department, and transferred 2,100 units to the finished goods storage area. All direct materials are added at the beginning of the process. The units in process at the end of the month are 45% complete concerning conversion costs. The department uses the weighted-average method. The Finishing Department incurred the following costs:

	Beginning WIP	Added this month	Total
Transferred in	\(6,250	\)25,000	\(31,250
Direct materials	500	2,000	2,500
Conversion cost	1,250	5,590	6,840
Total	\)8,000	\(32,590	\)40,590

8. How many units are still in process at the end of the month?

9. Compute the equivalent units of production for the Finishing Department.

10. Determine the cost per equivalent unit for transfer, direct materials, and conversion costs.

11. Determine the cost to be transferred to Finished Goods Inventory.

Short answer

8. The number of units still in process at the end of the month is 400 units.

9. The equivalent unit of production for the finishing department is

10. The cost per equivalent unit for transferred-in units is $12.50, for direct material is $1, and for conversion cost is $3.

11. The cost to be transferred to the finished goods inventory account is $40,590

Step-by-step solution

Meaning of Finished Goods

Finished goods inventory means the inventory completed through the manufacturing process and ready for sale in the market. It is treated as acurrent asset in the financial statements.

The number of units is still in process at the end of the month

$$\begin{gathered} \mathbf{EndingWIP}\mathbf{=}\mathbf{BeginningWIP}\mathbf{+}\mathbf{Receivedduringtheyear}\mathbf{-}\mathbf{Transferredtofinishedgoodsaccount} \\ \mathbf{=}\mathbf{500}\mathbf{+}\mathbf{2}\mathbf{,}\mathbf{000}\mathbf{-}\mathbf{2}\mathbf{,}\mathbf{100} \\ \mathbf{=}\mathbf{400} \end{gathered}$$

Equivalent units of production for the finishing department for transferred in

$$\begin{gathered} \mathbf{EUP}\mathbf{=}\left(\mathbf{Completedunits}\mathbf{\times }\mathbf{Completion}\mathbf{\%}\right)\mathbf{+}\left(\mathbf{Inprocessunits}\mathbf{\times }\mathbf{Completion}\mathbf{\%}\right) \\ \mathbf{=}\left(\mathbf{2}\mathbf{,}\mathbf{100}\mathbf{\times }\mathbf{100}\mathbf{\%}\right)\mathbf{+}\left(\mathbf{400}\mathbf{\times }\mathbf{100}\mathbf{\%}\right) \\ \mathbf{=}\mathbf{2}\mathbf{,}\mathbf{500} \end{gathered}$$

Equivalent units of production for the finishing department for direct material

$$\begin{gathered} \mathbf{EUP}\mathbf{=}\left(\mathbf{Completedunits}\mathbf{\times }\mathbf{Completion}\mathbf{\%}\right)\mathbf{+}\left(\mathbf{Inprocessunits}\mathbf{\times }\mathbf{Completion}\mathbf{\%}\right) \\ \mathbf{=}\left(\mathbf{2}\mathbf{,}\mathbf{100}\mathbf{\times }\mathbf{100}\mathbf{\%}\right)\mathbf{+}\left(\mathbf{400}\mathbf{\times }\mathbf{100}\mathbf{\%}\right) \\ \mathbf{=}\mathbf{2}\mathbf{,}\mathbf{500} \end{gathered}$$

Equivalent units of production for the finishing department for conversion cost

$$\begin{gathered} \mathbf{EUP}\mathbf{=}\left(\mathbf{Completedunits}\mathbf{\times }\mathbf{Completion}\mathbf{\%}\right)\mathbf{+}\left(\mathbf{Inprocessunits}\mathbf{\times }\mathbf{Completion}\mathbf{\%}\right) \\ \mathbf{=}\left(\mathbf{2}\mathbf{,}\mathbf{100}\mathbf{\times }\mathbf{100}\mathbf{\%}\right)\mathbf{+}\left(\mathbf{400}\mathbf{\times }\mathbf{45}\mathbf{\%}\right) \\ \mathbf{=}\mathbf{2}\mathbf{,}\mathbf{280} \end{gathered}$$

Calculation of cost per unit

Cost to be transferred to finished goods inventory

Particulars:	Calculation	Amount ($)
Transferred in:
Completed	2,100 EUP x $12.50 per EUP	26,250
In process	400 EUP x $12.50 per EUP	5,000
Total (A)		31,250
Direct material
Completed	2,100 EUP x $1 per EUP	2,100
In process	400 EUP x $1 per EUP	400
Total (B)		2,500
Conversion cost
Completed	2,100 EUP x $3 per EUP	6,300
In process	180 EUP x $3 per EUP	540
Total (C )		6,840
Total cost of manufacturing transferred (A+B+C)		40,590