Question
Gamma Ltd manufactures play-stations. The costing system uses two cost categories, direct materials and conversion costs. Each product must pass through the Assembly Department, the
Gamma Ltd manufactures play-stations. The costing system uses two cost categories, direct materials and conversion costs. Each product must pass through the Assembly Department, the Programming Department, and the Testing Department. Direct materials are added at the beginning of the production process. Conversion costs are allocated evenly throughout the production process. Gamma Ltd uses the weighted-average method of process costing.
The following information is available for the month of August 2022 for the Assembly Department.
Beginning work-in-process inventory (BWIP) 400 units
Conversion costs (40% complete)
Units started during August 1,200 units
Ending work-in-process inventory (EWIP) 200 units
Conversion costs (60% complete)
The cost details for the month of August are as follows:
Beginning work-in-process inventory (BWIP):
Direct materials $420,000
Conversion costs $310,000
Direct materials costs added during August $960,000
Conversion costs added during August $1,090,000
Based on the information provided, compute the following for Gamma Ltd's Assembly Department, showing your workings and answers in the space below.
a. Compute the equivalent units for direct materials and conversion costs for the month of August. (4 marks)
b. Compute the direct materials cost and conversion cost per equivalent unit for the month of August. (4 marks)
c. Compute the total cost of goods completed and transferred out during the month of August. (4 marks)
d. Compute the total amount of direct materials and conversion costs assigned to the ending work-in-process inventory (EWIP) for the month of August. (4 marks)
e. Discuss the key differences in computing the cost of products using the weighted-average and the first-in-first-out (FIFO) methods of process costing (students are to explain the computational differences in detail, no numbers or workings are required). (4 marks)
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