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4 April, 04:15

PA3.

LO 5.3Pant Risers manufactures bands for self-dressing assistive devices for mobility-impaired individuals. Manufacturing is a one-step process where the bands are cut and sewn. This is the information related to this year’s production:

Ending inventory was 100% complete as to materials and 70% complete as to conversion, and the total materials cost is $57,540 and the total conversion cost is $36,036. Using the weighted-average method, what are the unit costs if the company transferred out 17,000 units? What is the value of the inventory transferred out and the value of the ending WIP inventory?

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  1. 4 April, 06:43
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    Statement of Equivalent Units

    Material Conversion

    Units Units

    Finished goods 17,000 17,000

    Add: Ending work-in-progress 4,000 2,800

    Average divisor 21,000 19,800

    Computation of cost per unit using weighted average method

    Material = $57,540

    21,000 units

    = $2.74 per unit

    Conversion = $36,036

    19,800 units

    = $1.82 per unit

    Value of inventory transferred out: $

    Material 17,000 units x $2.74 = 46,580

    Conversion 17,000 units x $1.82 = 30,940

    Total 77,520

    Explanation:

    In this case, we need to prepare statement of equivalent units in order to determine the average divisor. The average divisor is the aggregate of units transferred out and closing work-in-progress. Closing work-in-progress is the difference between units to account for and units transferred out.

    Thereafter, we will divide the total cost of material and conversion by the average divisors in order to obtain the unit cost of material and conversion.

    Then, we will multiply the unit cost of material and conversion by the units transferred out.
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