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  • 1.  WIP QUESTION

    Posted 06-09-2022 01:40 AM
    Dear Friends,

    I couldnt find the right solution ...

    Fact Pattern: Superb Hancock Company uses a process costing system in which all materials are added at the beginning of the first process. Conversion costs are added evenly throughout the process. During the past month, 10,000 units were started in production, and 8,000 were completed and transferred to the next department. There were no beginning inventories. The ending inventories were 70% complete at the end of the month. The company uses a weighted-average method for inventory valuation.
    If Superb Hancock's materials used in production cost $15,000 and its conversion costs incurred were $25,000, what is the value (rounded) of the ending work-in-process inventory in the first processing department?


    ------------------------------
    TIMUCIN ONER
    Director/Manager
    ANTALYA
    Turkey
    ------------------------------


  • 2.  RE: WIP QUESTION

    Posted 06-10-2022 02:00 AM
    Hi Timucin,

    See below the suggested solution for the given problem:

    Direct Materials Conversion Costs
    Beginning WIP               -  
    Units started       10,000
    Units to account for       10,000
    Beginning WIP               -  
    Units Started & Completed         8,000
    Units Completed         8,000                   8,000                    8,000
    Ending WIP         2,000                   2,000                    1,400 (2000 * 70%)
    Unites accounted for (A)       10,000                 10,000                    9,400
    Cost incurred (B)  $        15,000.00  $         25,000.00
    Cost per EUP (B/A)  $                 1.50  $                  2.66
    Ending WIP:
    Direct materials : (2,000 units * $1.50)  $3,000.00
    Conversion costs: (1,400 * $2.66)  $3,724.00
    Cost of Ending WIP  $6,724.00



    ------------------------------
    JHON PAULO DE PADUA
    Accountant
    Dubai
    United Arab Emirates
    ------------------------------



  • 3.  RE: WIP QUESTION

    Posted 06-10-2022 02:36 AM
    Dear Jhon,

    Thank you for your support. Everything is fine till calculating E/I .  I am struggling to understand why we multiply D/M with 2.000 units instead of 1.400 units? I would much appreciate if you can tell me the logic?

    Regards

    Direct materials : (2,000 units * $1.50)  $3,000.00
    Conversion costs: (1,400 * $2.66)  $3,724.00
    Cost of Ending WIP  $6,724.00


    ------------------------------
    TIMUCIN ONER
    Director/Manager
    ANTALYA
    Turkey
    ------------------------------



  • 4.  RE: WIP QUESTION

    Posted 06-10-2022 05:33 AM
    Hi,

    Ending inventory is 70% completed as to conversion cost, and in this problem it is presumed ending WIP is 100% complete as to Direct Materials. so for D/M, it is complete 100%, 2,000 units, while the conversion is 70% only, 1,400 units.

    ------------------------------
    JHON PAULO DE PADUA
    Accountant
    Dubai
    United Arab Emirates
    ------------------------------