The ledger of American Company has the following work in process account. Work in Process—Painting 5/1 Balance 3,790 5/31 Transferred out ? 5/31 Materials 5,930 5/31 Labor 4,068 5/31 Overhead 2,280 5/31 Balance ? Production records show that there were 600 units in the beginning inventory, 30% complete, 1,700 units started, and 1,500 units transferred out. The beginning work in process had materials cost of $3,040 and conversion costs of $750. The units in ending inventory were 40% complete. Materials are entered at the beginning of the painting process.

Completion of question:

a) How many units are in process at May 31

b) What is the units material cost for May?

c) What is the unit conversion cost for May

d) What is the total cost of units transferred out in May

e) What is the cost of the May 31 inventory.

American Company

a) Units are in process at May 31 :  800 units

b) Units material cost for May: $8,970 (5,930 +  3,040)

c) Unit conversion cost for May : $7,098 (6,348 + 750)

d) Total cost of units transferred out in May:  $13,243

e) The cost of the May 31 inventory: $2,825

Explanation:

a) Data:

Work in Process—Painting

5/1 Balance 3,790

5/31 Transferred out ?  = $13,243

5/31 Materials 5,930

5/31 Labor 4,068

5/31 Overhead 2,280

5/31 Balance ?  = $2,825

b) Production

Beginning WIP =    600 units

Units started        1,700

Total units           2,300

Transferred out   1,500

Ending WIP            800

c) Calculation of Equivalent units and costs:

Beginning work in process inventory

                             Units   Equivalent unit     Cost

Beginning WIP  =    600     30%   180        3,790

Units started        1,700:    

Materials                                                    5,930

Labor                                                          4,068

Overhead                                                   2,280

Total units           2,300                         $16,068

Transferred out  1,500    100%  1,500  $13,243

Ending WIP           800      40%    320   $2,825

Equivalent unit of ending WIP = 320 units (800vx 40%)

Cost per equivalent unit = $16,068/1,820 = $8.8286

Total cost of units transferred out = $13,243 (1,500 x $8.8286)

Cost of Ending work in process = $2,825 (320 x $8.8286)

d) Equivalent units and cost per equivalent units are calculations generated from a method of apportioning the cost of production to the finished goods and the ending work in process based on the degree or percentage of completion of the units.