Question

Hannish Orchards, a juice manufacturer, uses a process that adds all the raw materials at the beginning of the process. Conversion costs are evenly distributed. Assume there are no beginning inventories. During the period the company started making 10,000 gallons. There were 2,000 gallons left in ending WIP that were 40% of the way through the process. Costs incurred during the period were: $ 16,000 Raw materials $ 5,500 Conversion costs The cost assigned to ending work in process would be closest to: A) $3,700 B) $4,300 C) $1,720 D) $1,780

Answer 1

Answer:

a. $3,700

Explanation:

Unit completed = 10000 - 2000 = 8000

Equivalent unit of material = 10000

Equivalent unit of conversion = 8000 + (2000*40%)

Equivalent unit of conversion = 8800

Cost per equivalent unit of material = $16000/10000

Cost per equivalent unit of material = $1.6

Cost per equivalent unit of conversion = $5500/8800

Cost per equivalent unit of conversion = $0.625

Cost of ending WIP = Equivalent unit of material*Unit cost+Equivalent unit of conversion*Unit cost

Cost of ending WIP = 2000*$1.6 + (2000*40%)*$0.625

Cost of ending WIP = $3200 + $500

Cost of ending WIP = $3,700