Student Question
“Hi Nathan,
I’m having a problem understanding how to calculate the started and completed units.
I see in the problem below it says that there are 80,000 units in production.
To arrive at the started and completed units, are they subtracting the Ending WIP of 80K to arrive at 75K units?”
– Wanda.
MCQ – Process Costing
A.P. Hill Corporation uses a process-costing system. Products are manufactured in a series of three departments. The following data relate to Department Two for the month of February.
| Beginning work-in-process (70% complete) | 10,000 units |
| Goods started in production | 80,000 units |
| Ending work-in-process (60% complete) | 5,000 units |
The beginning work-in-process was valued at $66,000, consisting $20,000 of transferred-in costs, $30,000 of material costs, and $16,000 of conversion costs.
Materials are added at the beginning of the process; conversion costs are added evenly throughout the process.
Costs added to production during February were
| Transferred-in | $16,000 |
| Materials used | 88,000 |
| Conversion costs | 50,000 |
All preliminary and final calculations are rounded to two decimal places.
Under the weighted-average method, how much materials cost did A.P. Hill transfer out of Department Two doing February?
A. $112,500
B. $88,000
C. $93,500
D. $111,350 (correct)
Correct answer: (D) For materials, the equivalent-unit calculation under the weighted-average method is
| Beginning WIP | 10,000 units x 100% | 10,000 |
| Started and completed | 75,000 units x 100% | 75,000 |
| Ending WIP | 5,000 units x 100% | 5,000 |
| Weighted-average EUP for materials | 90,000 |
The amount transferred out will include materials costs incurred during the current period plus any amount in beginning inventory.
The materials costs consisted of $30,000 in beginning inventory and $88,000 incurred during the month, for a total of $118,000.
The equivalent unit cost of materials is, therefore, $1.31 ($118,000/90,000 EU).
Total materials cost transferred is $111,350 (85,000 units transferred x $1.31).
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To arrive at the started and completed units this period, we have to compute first for the total units to account for:
| Beginning WIP | 10,000 |
| Started units this period | 80,000 |
| Total units to account for | 90,000 |
| started and completed this period, ending WIP, spoilage (lost units) |
|
Remember to always reconcile the total of the units to account for in computing in EUP as follows:
| Beginning WIP | 10,000 |
| Started and completed units this period | 75,000 |
| Ending WIP | 5,000 |
| Total units to account for | 90,000 |
Therefore, the started and completed unit of 75,000 units was computed by deducting the ending WIP (5,000 units) and beginning WIP (10,000 units) from the total units to account for of 90,000 units.
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2 Comments on “CMA Part-One Mini-Lesson: How to Calculate the Started and Completed Units?”
What if materials are added at different points in the process and not all at the beginning?
Hi Rosie,
I can offer CMA coaching support via my CMA review course, please check it here.
Thank you,
Nathan