Markus Corporation reported the following as of February 1, (weighted-average method). Work in Process: Feb. 1? Direct material$42,000 Conversion cost$20,000February production costs:? Direct material 470,000 Conversion cost280,000Conversations with the production supervisor revealed that materials are introduced at the start of the process and conversion cost is incurred evenly throughout manufacturing. The company started 29,000 units during the month. Goods in process at the beginning and end of February totaled 3,000 units and 5,000 units, respectively, the latter batch being 60% complete.Just prior to leaving on vacation, a trusted staff assistant was asked to compute the cost of February's ending work-in-process inventory. Her calculations showed a huge
rise in unit cost when compared with the February 1 figures, soaring to $250 [($470,000 + $280,000) ÷ 3,000 units (5,000 units × 60%)].Required:A. Did the staff assistant make any errors in her calculations? Explain.B. Analyze the company's production volume and determine the proper equivalent-unit figures for February.C. Calculate the proper unit costs for February.D. Calculate the cost of the February 28 work-in-process inventory.
What will be an ideal response?
A. Yes, the assistant made several errors. Unit costs under the weighted-average method are derived by combining the beginning work-in-process costs with costs of the current month, and the assistant used only the latter. Additionally, she ignored units completed during February and incorrectly spread materials cost in the ending work-in-process inventory over 3,000 units rather than the correct figure of 5,000 units.
B. Units completed: 27,000 (3,000 + 29,000 - 5,000)
Equivalent units-materials: 32,000 (27,000 + 5,000)
Equivalent units-conversion cost: 30,000 [27,000 + (5,000 ÷ 60%)]
C. Cost per equivalent unit-materials: $16 [($42,000 + $470,000) ÷ 32,000] units
Cost per equivalent unit-conversion cost: $10 [($20,000 + $280,000) ÷ 30,000] units
D. The ending work-in-process inventory consists of materials (5,000 units × $16 = $80,000) and conversion cost (3,000 units × $10 = $30,000), for a total of $110,000.
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