Tom & Joy Company follows the Weighted-Average method for inventory valuation and started the period with Work-in-Progress (WIP) Inventory of 1,000 units. Direct Materials (DM) costs and Conversion Costs (CC) in the beginning WIP Inventory are $580 and $740 respectively. During the period, an additional 4,000 units having $1,920 of DM costs and $2,480 of CC were added to the WIP Inventory. Total equivalent units of work done for DM and CC were 5,000 units and 4,600 units in that order.
At the end of the period, they had 500 units in ending inventory that were 100% complete with respect to DM and 20% complete with respect to CC. Find out the total cost of units completed and moved out of the WIP Inventory.

Question

Quizplus · Accepted Answer

Total costs to be accounted for Direct Materials = $580 + $1,920 = $2,500;
Total Direct Materials costs per equivalent unit = $2,500/5,000 units = $0.50;
Therefore, total Direct Materials costs of units completed and moved from WIP Inventory is 4,500 (1,000 + 4,000 - 500) units × $0.50 = $2,250.
Total costs to be accounted for Conversion Costs = $740 + $2,480 = $3,220;
Total Conversion Costs per equivalent unit = $3,220/4,600 units = $0.70;
Therefore, total Conversion Costs of units completed and moved from WIP Inventory is 4,500 (1,000 + 4,000 - 500) units × $0.70 = $3,150.
Total cost of units completed and moved out of the WIP Inventory is $5,400 ($2,250 + $3,150).

Tom & Joy Company Follows the Weighted-Average Method for Inventory