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Dear sir,
Why the answer of this one is $22,890?
My solution is: opening WIP units in last period: 2000*40%=800
Completed units : 14000
Closing WIP units in last period. : 3000*30%=900
Total units. : 15700
Costs in last period : 51000+193170=244170$
Cost per unit=15.6
Value of closing WIP = 15.6*3000*30%=14040$Why my solution is wrong? Hope you can help me,thanks!:)
Your figure for complete units includes the 2,000 units that were WIP at the start of the period. Therefore only 12,000 units were completed from start to finish during the period.
You should therefore have got total equivalent units to be 800 + 12,000 + 900 = 13,700.
This gives a cost per unit for conversion costs of 193,170 / 13700 = $14.10
With regard to the material cost, the question says that all materials are input at the commencement of the process – this means that the materials element in WIP is always 100% complete (and this is the usual situation).
So the equivalent units for materials are 0 (finishing opening WIP) + 12,000 (units done completely this period) + 3000 (closing WIP) = 15,000
So the cost per unit for materials is $51,000 / 15,000 = $3.40
So….the value of the closing WIP is (3000 x 30% x 14.10) for conversion + (3,000 x 3.40) for materials. Total comes to $22890.
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