Question 46

Section B: This section consists of ONE question with five parts. All parts in this section are to be answered. Produce your answers with workings in the space after the question. (20 marks)

RL 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. In each department, direct materials are added at the beginning of the production process and conversion costs are allocated evenly throughout the process. RL Ltd uses the weighted-average process costing method.

The following information is available for the month of May 2022 for the Assembly Department.

Work-in-process (WIP), beginning inventory 400 units

Conversion costs (40% complete)

Units started during May 1,200 units

Work-in-process (WIP), ending inventory: 200 units

Conversion costs (60% complete)

The cost details for the month of May are as follows:

Work-in-process (WIP), beginning inventory:

Direct materials $420,000

Conversion costs $310,000

Direct materials costs added during May $960,000

Conversion costs added during May $1,090,000

Required (ALL WORKINGS MUST BE SHOWN! Marks are awarded for workings):

a. Compute the equivalent units for direct materials and conversion costs for the month of May. (4 marks)

b. Compute the direct materials cost and conversion cost per equivalent unit for the month of May (present your answers to the nearest cent, that is, to two decimal places). (4 marks)

c. Compute the total cost of goods completed and transferred out during May. (4 marks)

d. Compute the total cost of direct materials and conversion costs assigned to the ending work-in-process account for May. (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). (4 marks)