Question

Adams Ski Company manufactures snow skis. During the most recent accounting period, the company’s finishing department transferred 4,350 sets of skis to finished goods. At the end of the accounting period, 490 sets of skis were estimated to be 40 percent complete. Total product costs for the finishing department amounted to $204,570.

Required

Determine the cost per equivalent.

Determine the cost of the goods transferred out of the finishing department.

Determine the cost of the finishing department’s ending work in process inventory.

Answer 1

• The cost per equivalent unit is equal to $45.39
• The cost of goods transferred out is $197,446.50
• The cost of ending work in process is $8,896.44

What is meant by manufacturing process?

The manufacturing process is the method that is used to produce goods and services from the raw materials.

Given values:

Units transferred out: 4,350

Units in ending inventory: 196 (490 X 40%)

Total cost of department: $204,750

Step-1 Computation of equivalent units in the production:

$\rm\ Equivalent \rm\ units =\rm\ Units \rm\ transferred \rm\ out + \rm\ Units \rm\ in \rm\ ending \rm\ inventory\\\rm\ Equivalent \rm\ units=4,350 + 196\\\rm\ Equivalent \rm\ units=4,546$

Step-2 Computation of cost per equivalent:

$\rm\ Cost \rm\ per \rm\ equivalent \rm\ unit=\frac{\rm\ Total \rm\ cost}{\rm\ Total \rm\ equivalent \rm\ units}\\ \rm\ Cost \rm\ per \rm\ equivalent \rm\ unit=\frac{\ 204,750}{4,546} \\\rm\ Cost \rm\ per \rm\ equivalent \rm\ unit=\ 45.39$

Step-3 Computation of cost of transferred out:

$\rm\ Cost \rm\ of \rm\ transferred \rm\ out=\rm\ Units \rm\ transferred \rm\ out \times\ \rm\ Cost \rm\ per \rm\ equivalent \rm\ unit\\\rm\ Cost \rm\ of \rm\ transferred \rm\ out=4,350 \times\ \ 45.39\\\rm\ Cost \rm\ of \rm\ transferred \rm\ out=\ 197,446.50$

Step-4 Computation of cost of ending WIP:

$\rm\ Cost \rm\ of \rm\ ending \rm\ WIP=\rm\ Units \rm\ in \rm\ ending \rm\ inventory \times\ \rm\ Cost \rm\ per \rm\ equivalent \rm\ unit\\\rm\ Cost \rm\ of \rm\ ending \rm\ WIP=196\times\ \ 45.39\\\rm\ Cost \rm\ of \rm\ ending \rm\ WIP=\ 8,896.44$

Therefore, the required parts are solved in the above steps.

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