[KeanMgmtAcct]

TOTAL PROBLEM (NOTE MY SOLUTION IS BELOW THE PROBLEM BUT IT Isn't BALANCING)


Beginning of Month #'s:
Direct Labor = $24,000
WIP = 5,000
Direct Material = $20,000
Completed = 80,000 completed and transferred to Packaging Dept
Over Head = $4,000

During Month #'s
DM = $180,000
DL = $200,000
Over Head = $59,200

End of Month #
12000 units remaining in EWIP with 10% complete


Questions to be answered with this info:
1. Calculate Equivalent Unit of Production for June
2. June Total Cost Accounted For
3. Total Cost per Equivalent Units of Production
4. Total Cost of Goods Transferred to Packaging
5. Total Cost of End of June WIP


My solutions:

Units Complete 80,000
BWIP + 5,000
= 85,000
EWIP + 12,000 (***Is it correct to add this number or should I sub. It)
= 97,000

Materials Conversion
Units Completed 85,000 85,000
Materials (12,000 x 100%) 12,000
Conversion (12,000 x 10%) 1,200
= 97,000 = 86,200


Materials (20,000 + 180,000) / 97,000 = $2.06 per unit
Conversion (24,000 + 4<000 + 200,000 + 59,200) / 86,200 = $3.34 per unit

Total Unit Cost $2.06 + $3.34 = $5.40

COG Transferred OUt = 5.40 x 85,000 = 459,000

Cost of EWIP = (2.06 x 12,000) + (3.34 x 1,200)
= (24,720) + (4,008)
= $28, 728

Cost Reconciliation

Cost of BWIP (24,000 + 20,000 + 4,000) = 48,000
Cost of WIP (180,000 + 200,000 + 59,200) = 439,200
(48,000 + 439,200) = $487,200
Cost Accounted For:
Goods Transferred Out: 459,000
WIP 28,728
= 487,728


Shouldn't THE TWO NUMBERS IN BLUE MATCH??

[morgaine300]

Unfortunately there is too much missing information, and also incorrect calculations, making it difficult to follow the rest of the work. First, it doesn't say if it's FIFO or average. It looks like you're attempting to do average, but it's a bad idea to assume someone knew how to do it correctly, and since the numbers are incorrect, it's just hard to say. It doesn't give a completed percent for beginning balances, but that may also be because it's supposed to be average. If this is the way the numbers are presented in the problem, I have to say I find it confusing.

Now, you got off right from the start in your figuring of the units to be accounted for, which is messing up everything else. You do not add the units completed to beginning inventory, for the simple reason that the units completed includes beginning inventory. You have 80,000 completed and 12,000 in ending inventory. How does beginning inventory count into that? If they weren't completed, are they in ending inventory? They have to be somewhere. They're in the completed number. So you actually have 92,000 units to be accounted for. (Which also means 87,000 units were started this month.)

I also don't know what that overhead number is supposed to be. Since I don't see information for how to apply overhead, I could assume that is the applied overhead. (But again, there's that assumption I don't like to make.) Since overhead costs and overhead applied are two different things, you need to specify. Makes it really difficult when little details like that are left off.

Because the numbers at the beginning are off, I did not take them and carry them through the rest of the work. You need to get those corrected first.

[KeanMgmtAcct]

Unfortunately there is too much missing information, and also incorrect calculations, making it difficult to follow the rest of the work. First, it doesn't say if it's FIFO or average. It looks like you're attempting to do average, but it's a bad idea to assume someone knew how to do it correctly, and since the numbers are incorrect, it's just hard to say. It doesn't give a completed percent for beginning balances, but that may also be because it's supposed to be average. If this is the way the numbers are presented in the problem, I have to say I find it confusing.

Now, you got off right from the start in your figuring of the units to be accounted for, which is messing up everything else. You do not add the units completed to beginning inventory, for the simple reason that the units completed includes beginning inventory. You have 80,000 completed and 12,000 in ending inventory. How does beginning inventory count into that? If they weren't completed, are they in ending inventory? They have to be somewhere. They're in the completed number. So you actually have 92,000 units to be accounted for. (Which also means 87,000 units were started this month.)

I also don't know what that overhead number is supposed to be. Since I don't see information for how to apply overhead, I could assume that is the applied overhead. (But again, there's that assumption I don't like to make.) Since overhead costs and overhead applied are two different things, you need to specify. Makes it really difficult when little details like that are left off.

Because the numbers at the beginning are off, I did not take them and carry them through the rest of the work. You need to get those corrected first.

Hi,

Thanks for your reply. I have to say I 100% agree with your questions about this problem! I am required to take this course for my major and since week 1 of it I have been struggling. I have been meeting with two tutors who also can't answer the questions the professor gives and I also met with a professor that teaches the same course and he couldn't either. Needless to say the night before the exam I was pulling my hair out!! The information provided on this site was the ONLY information we were given to solve the problem. I asked myself the same questions you are asking and thought that I was the slow/stupid one because I couldn't understand it. I also referred to the text book (which I have found several mistakes in so far) and the way they have it leaves me with even more questions because it doesn't make sense in my mind the way they include numbers that I think shouldn't be...

Thanks again for your reply. I appreciate it!!