At Hodgson Corporation, direct materials are added at the beginning of the process and conversions costs are uniformly applied. Other details include: Beginning WIP direct materials $ 33 comma 000 Beginning WIP conversion costs $ 24 comma 250 Costs of materials added $ 394 comma 100 Costs of conversion added $ 280 comma 125 WIP beginning (50% for conversion) 19 comma 200 units Units started 119 comma 500 units Units completed and transferred out 106 comma 700 units WIP ending (60% for conversion) 32 comma 000 units What is the total cost of units completed and transferred out? (Round intermediate calculations to the nearest cent and the final answer to the nearest dollar.)

=  $586,596

Explanation:

To value the the total cost of units transferred we multiply the equivalent cost per unit for each cost element by the equivalent unit under each cost element. There are two methods available for this, the first-in-first-out (FIFO) method and the Weighted average cost method. I would use the weighted average cost method

Closing working progress  = opening work in progress + units added - transferred out

= 19,200 + 119,500 - 106,700 = 32,000 units

Step 1

Equivalent units

Equivalent units for materials  = 106,700 +32,000 = 138,700 units

We assume that all the required materials were already added.

Item                                                               Equivalent units for conversion

Completed units           106,700× 100% =         106,700

Closing WIP                    32,000 × 60% =         19,200.

Total equivalent units                                        125,900

Equivalent unit for conversion cost = 125,900 units

Step 2

Cost per equivalent per units of materials

Total cost of materials  =33,000 +394,100 =  427,100.

Cost per EU = 427,100/138,700 EU =  $3.08  per EU

Cost per equivalent unit of conversion cost

Total conversion cost = $24,250 + 280, 215 = 304,465

Cost per equivalent = $304,465/125,900 = $2.418 per EU

Step 3

Valuation of completed units

Material cost = 106,700 × 3.08=  328,562.15

Conversion cost = 106,700×  2.418 =  258,033.48

Total cost of units completed

= 328,562.15 + 258,033.48=  $586,595.63

=  $586,596 to the nearest dolla

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