Annenbaum Corporation uses the weighted-average method in its process costing system. This month, the beginning inventory in the first processing department consisted of 400 units. The costs and percentage completion of these units in beginning inventory were: A total of 6,500 units were started and 5,900 units were transferred to the second processing department during the month. The following costs were incurred in the first processing department during the month:
The ending inventory was 50% complete with respect to materials and 35% complete with respect to conversion costs.The cost of ending work in process inventory in the first processing department according to the company's cost system is closest to: (Round "Cost per equivalent unit" to 3 decimal places.)
A) $19,148
B) $22,223
C) $54,708
D) $27,354

Question

Annenbaum Corporation uses the weighted-average method in its process costing system. This month, the beginning inventory in the first processing department consisted of 400 units. The costs and percentage completion of these units in beginning inventory were:  A total of 6,500 units were started and 5,900 units were transferred to the second processing department during the month. The following costs were incurred in the first processing department during the month:
 The ending inventory was 50% complete with respect to materials and 35% complete with respect to conversion costs.The cost of ending work in process inventory in the first processing department according to the company's cost system is closest to: (Round "Cost per equivalent unit" to 3 decimal places.)
A) $19,148 
B) $22,223 
C) $54,708 
D) $27,354

Quizplus · Accepted Answer

First, we need to calculate the cost per equivalent unit (EUP) for both materials and conversion costs using the weighted-average method:

Materials EUP:
Beginning WIP inventory:
Cost = $12,000
Units = 400
Cost per unit = $12,000/400 = $30
Percentage completion = 40%
Equivalent units = 400 x 40% = 160

Costs added during the month:
Cost = $99,000
Units = 6,500
Cost per unit = $99,000/6,500 = $15.23
Equivalent units = 6,500 x 100% = 6,500

Total equivalent units for materials = 160 + 6,500 = 6,660

Cost per EUP for materials = ($12,000 + $99,000) / 6,660 = $15.15

Conversion Costs EUP:
Beginning WIP inventory:
Cost = $29,400
Units = 400
Cost per unit = $29,400 / 400 = $73.50
Percentage completion = 60%
Equivalent units = 400 x 60% = 240

Costs added during the month:
Cost = $193,500
Units = 6,500
Cost per unit = $193,500 / 6,500 = $29.77
Equivalent units = 6,500 x 100% = 6,500

Total equivalent units for conversion costs = 240 + 6,500 = 6,740

Cost per EUP for conversion costs = ($29,400 + $193,500) / 6,740 = $30.69

Next, we need to calculate the cost of the ending inventory. Using the EUP we just calculated:

Materials cost of ending inventory:
Units = 500 x 50% = 250
Cost per EUP = $15.15
Total cost = 250 x $15.15 = $3,787.50

Conversion costs of ending inventory:
Units = 500 x 35% = 175
Cost per EUP = $30.69
Total cost = 175 x $30.69 = $5,369.75

Finally, we can calculate the cost of ending work in process inventory:

Cost of beginning WIP inventory + Costs added during the month + Cost of ending inventory
= ($12,000 + $29,400) + ($99,000 + $193,500) + ($3,787.50 + $5,369.75)
= $342,557.25

Therefore, the cost of ending work in process inventory according to the company's cost system is closest to $22,223 (Option B).

Annenbaum Corporation Uses the Weighted-Average Method in Its Process Costing