Haffner Corporation uses the weighted-average method in its process costing system. Data concerning the first processing department for the most recent month are listed below:
Beginning work in process inventory:
500
Units in beginning work in process inventory
$7,800
Materials costs .
$9,100
Conversion costs
85%
Percentage complete with respect to materials
55%
Percentage complete with respect to conversion
7,000
Units started into production during the month
6,100
Units transferred to the next department during the month
$102,700
Materials costs added during the month .
$184,400
Conversion costs added during the month .
500
Ending work in process inventory:
Units in ending work in process inventory
1,400
Percentage complete with respect to materials
60%
Percentage complete with respect to conversion
50%
The cost of ending work in process inventory in the first processing department according to the company”s cost system is closest to:
A) $37,278
B) $33,293
C) $62,129
D) $31,065
The Correct Answer and Explanation is :
To determine the cost of the ending work in process inventory using the weighted-average method, we will follow these steps:
Step 1: Calculate the Equivalent Units for Ending Work in Process Inventory
Equivalent Units for Materials:
- The number of units in the ending work in process inventory is 1,400.
- Since the percentage complete for materials is 60%, the equivalent units for materials will be: [
1,400 \text{ units} \times 60\% = 840 \text{ equivalent units for materials}
]
Equivalent Units for Conversion Costs:
- The percentage complete for conversion costs is 50%.
- The equivalent units for conversion will be: [
1,400 \text{ units} \times 50\% = 700 \text{ equivalent units for conversion}
]
Step 2: Calculate the Cost per Equivalent Unit
We need to calculate the cost per equivalent unit for materials and conversion costs using the weighted-average method.
Materials Costs:
- Beginning materials costs = $7,800.
- Materials costs added during the month = $102,700.
- Total materials costs = $7,800 + $102,700 = $110,500.
Total equivalent units for materials = units transferred (6,100) + equivalent units in ending WIP (840):
[
6,100 + 840 = 6,940 \text{ equivalent units for materials}
]
Cost per equivalent unit for materials:
[
\frac{\$110,500}{6,940} = \$15.91 \text{ per equivalent unit for materials}
]
Conversion Costs:
- Beginning conversion costs = $9,100.
- Conversion costs added during the month = $184,400.
- Total conversion costs = $9,100 + $184,400 = $193,500.
Total equivalent units for conversion = 6,100 (units transferred) + 700 (equivalent units in ending WIP):
[
6,100 + 700 = 6,800 \text{ equivalent units for conversion}
]
Cost per equivalent unit for conversion:
[
\frac{\$193,500}{6,800} = \$28.44 \text{ per equivalent unit for conversion}
]
Step 3: Calculate the Cost of Ending Work in Process Inventory
Materials Cost in Ending WIP:
The ending WIP consists of 840 equivalent units for materials, so the materials cost in the ending WIP is:
[
840 \text{ equivalent units} \times \$15.91 = \$13,358.40
]
Conversion Cost in Ending WIP:
The ending WIP consists of 700 equivalent units for conversion, so the conversion cost in the ending WIP is:
[
700 \text{ equivalent units} \times \$28.44 = \$19,908
]
Step 4: Total Cost of Ending Work in Process Inventory
The total cost of ending work in process inventory is the sum of the materials cost and the conversion cost:
[
\$13,358.40 \text{ (materials)} + \$19,908 \text{ (conversion)} = \$33,266.40
]
This amount rounds closest to $33,293, which is option B.
Conclusion:
The correct answer is B) $33,293. This calculation considers both the equivalent units and the weighted average cost method to allocate materials and conversion costs to the ending work in process inventory.