Adidos is a factory that produces soccer jerseys and it starts its process in the Cutting
Department. Upon completion of processes in Cutting Department, the product is
Transferred to Stitching Department in order to complete its processes.
In the Stitching Department, the conversion costs are incurred uniformly throughout the
Process. Materials are added only in the beginning of the process. Overhead is allocated
On the basis of 150% of the direct labour cost.
Work in process, 1 January 2015 (5,000 units, 70% complete) cost of which includes:
Transfer In $ 550,000
Direct Materials $ 900,000
Direct Labour $ 270,000
Overhead $ ?
During the month of January 2015, 75,000 units were completed and transferred to
Finished goods inventory.
The Stitching department’s costs during January 2015 were:
Transferred in $ 1,550,000
Material added $ 5,750,000
Direct Labour $ 2,500,000
Overheads $ ?
At the end of January 2015, 15,000 units were still in process in Stitching department.
These were expected to be 50% complete of for conversion.
Required:
a. Prepare the Stitching Department production cost report using the weighted
Average method for the month of January 2015 (round up to 2 decimal place).
b. Assume that the direct material cost and conversion cost of Stitching
Department in the current month increased by 20% and 30% each respectively.
What is the new direct material cost and conversion cost per equivalent units
And costs of units completed using the weighted average method (round up to
2 decimal place)