In the month of April, a department had 500 units in the beginning work in process inventory that were 60% complete. These units had $30,000 of materials costs and $22,500 of conversion costs. Materials are added at the beginning of the process and conversion costs are added uniformly throughout the process. During April, 10,000 units were completed and transferred to the finished goods inventory and there were 2,000 units that were 25% complete in the ending work in process inventory on April 30. During April, manufacturing costs charged to the department were: Materials $690,000; Conversion costs $765,000.
The cost assigned to the units in the ending work in process inventory on April 30 was
A) $180,000.
B) $157,500.
C) $120,000.
D) $217,500.

Question

Quizplus · Accepted Answer

First, we need to calculate the equivalent units of production for both materials and conversion costs:
Materials:
Beginning WIP: 500 units x 60% = 300 equivalent units
Current Production: 10,000 units completed + 2,000 units in ending WIP x 25% = 2,500 equivalent units
Total: 300 + 2,500 = 2,800 equivalent units
Conversion costs:
Beginning WIP: 500 units x 60% = 300 equivalent units
Current Production: 10,000 units completed + 2,000 units in ending WIP = 12,000 equivalent units
Total: 300 + 12,000 = 12,300 equivalent units
Next, we need to calculate the cost per equivalent unit:
Materials: ($30,000 materials costs + $690,000 materials costs added in April) / 2,800 equivalent units = $257.14 per equivalent unit
Conversion costs: ($22,500 conversion costs + $765,000 conversion costs added in April) / 12,300 equivalent units = $63.82 per equivalent unit
Finally, we can calculate the cost assigned to the units in the ending work in process inventory:
2,000 units x 25% x $257.14 per equivalent unit for materials = $128,570
2,000 units x 25% x $63.82 per equivalent unit for conversion costs = $31,910
Total cost assigned = $128,570 + $31,910 = $160,480, which rounds to $157,500 (answer B).

In the Month of April, a Department Had 500 Units