Realm Company uses process costing and had an equivalent cost of $2.30 per unit for direct materials and $1.80 per unit for conversion costs during May in its Rolling Department. There were 11,600 units completed and transferred to finished goods, and 1,000 units in ending Work in Process inventory for the Rolling Department that were 80% complete with respect to direct material and 60% complete with respect to conversion costs. How much is ending Work in Process in the Rolling Department?

Question

Quizplus · Accepted Answer

To calculate the equivalent units for ending Work in Process (WIP), we need to use the percentage of completion for each element (direct materials and conversion costs) of the 1000 units in ending WIP.

For direct materials, the 1000 units are 80% complete, so the equivalent units for direct materials is:

1000 x 0.80 = 800 units

For conversion costs, the 1000 units are 60% complete, so the equivalent units for conversion costs is:

1000 x 0.60 = 600 units

To calculate the total equivalent units for ending WIP, we add the equivalent units for direct materials and conversion costs:

800 + 600 = 1400 units

The cost per equivalent unit for the Rolling Department is:

Direct materials: $2.30
Conversion costs: $1.80

To calculate the total cost for ending WIP, we need to multiply the equivalent units by the cost per equivalent unit and sum the two costs:

Direct materials cost:

800 units x $2.30 = $1,840

Conversion costs:

600 units x $1.80 = $1,080

Total cost for the 1400 equivalent units:

$1,840 + $1,080 = $2,920

Therefore, the ending WIP for the Rolling Department is $2,920. Answer choice C is correct.

Realm Company Uses Process Costing and Had an Equivalent Cost