Pepper’s Pens uses the weighted average method of process costing for product costing. Pepper Potts, the owner, provides you the following information about the prior month’s production: August beginning WIP (40% complete with respect to conversion costs) 8,000 Units started in August 45,000 Units completed and transferred in August 52,000 Ending August WIP (70% complete with respect to conversion costs) 1,000 All direct materials are added at the beginning of the process. Conversion costs are added evenly throughout the process. Costs this period Beginning WIP Direct materials $463,500 $124,500 Conversion costs 247,500 24,200 Total manufacturing costs $ 711,000 $ 148,7001. How many units were started, completed and transferred out in August? How many were completed and transferred from beginning work-in-process in August? 2. Calculate the cost per equivalent unit for a. Direct materials b. Conversion costs 3. Calculate the direct materials and conversion costs assigned to units that were completed and transferred out in August, and those in ending WIP. 4. Tony Stark, a cost accountant in the company, has raised the concern that the FIFO method of process costing is not as informative about the changes in product costs as the weighted average method. Is Tony correct? Explain.

1. How many units were started, completed and transferred out in August?

How many were completed and transferred from beginning work-in-process in August?

2. Calculate the cost per equivalent unit for

a. Direct materials = $13.4151

b. Conversion costs = $2.8216

3. Calculate the direct materials and conversion costs assigned to units that were completed and transferred out in August, and those in ending WIP.

4. Tony Stark, a cost accountant in the company, has raised the concern that the FIFO method of process costing is not as informative about the changes in product costs as the weighted average method. Is Tony correct? Explain.

Explanation:

beginning WIP 8,000

100% complete for materials: $124,500

40% complete for conversion costs: $24,200

units started 45,000

units completed 52,000

ending WIP 1,000

100% complete for materials

70% complete for conversion costs

period costs:

Direct materials $463,500

Conversion costs $247,500

total manufacturing costs:

Direct materials $711,000

Conversion costs $148,700

EUP:

for materials 53,000

for conversion costs 52,700

cost per EUP:

Direct materials $711,000 / 53,000 = $13.4151

Conversion costs $148,700 / 52,700 = $2.8216

total cost assigned to finished units = [($711,000 / 53,000) x 52,000] + [($148,700 / 52,700) x 52,000] = $697,584.91 + $146,724.86 = $844,309.77

ending WIP = ($711,000 + $148,700) - $844,309.77 = $15,390.23

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