Answer to Assignment 1

Problem 1
Marwick’s Pianos, Inc.
1. Income Statement
For the Month of June

Sales (100 pianos × $250 per piano) $25,000

Cost of goods sold
(100 piano × $125 per piano) 12,500
Gross margin 12,500
Selling and administrative expenses:
Selling expenses:
Advertising $ 800
Sales salaries and commissions
[$1,200 + (10% × $25,000)] 3,700
Delivery of pianos
(100 pianos × $15 per piano) 1,500
Utilities 500
Depreciation of sales facilities 750
Total selling expenses 7,250
Administrative expenses:
Executive salaries 2,000
Insurance 250
Clerical [$700 + (100 pianos × $5 per piano)] 1,200
Depreciation of office equipment 400
Total administrative expenses 3,850
Total selling and administrative expenses 11,100
Net operating income $ 1,400

Marwick’s Pianos, Inc.

2. Income Statement
For the Month of June
 Total Per Piano
Sales (100 pianos × $250 per piano) $25,000 $250
Less variable expenses:
Cost of goods sold
(100 pianos × $125 per piano) 12,500 125
Sales commissions (10% × $25,000) 2,500 25
Delivery of pianos (100 pianos × $15 per piano) 1,500 15
Clerical (100 units × $5 per unit) 500 5
Total variable expenses 17,000 170
Contribution margin 8,000 $ 80
Less fixed expenses:
Advertising 800
Sales salaries 1,200
Utilities 500
Depreciation of sales facilities 750
Executive salaries 2,000
Insurance 250
Clerical 700
Depreciation of office equipment 400
Total fixed expenses 6,600
Net operating income $ 1,400

3. Fixed costs remain constant in total but vary on a per unit basis inversely with changes in the activity level. As the activity level increases, for
example, the fixed costs will decrease on a per unit basis. Showing fixed costs on a per unit basis on the income statement might mislead management
into thinking that the fixed costs behave in the same way as the variable costs. That is, management might be misled into thinking that the per unit fixed
costs would be the same regardless of how many pianos were sold during the month. For this reason, fixed costs generally are shown only in totals on a
contribution format income statement.

Problem 2
. a. Hawaiian Fantasy Tahitian Joy Total
Amount % Amount % Amount %
Sales ...............................................................................................................................
$500,000 100.0 $250,000 100.0 $750,000 100.0
Less variable expenses ...................................................................................................
350,000 70.0 100,000 40.0 450,000 60.0
Contribution margin .......................................................................................................
$150,000 30.0 $150,000 60.0 300,000 40.0
Less fixed expenses ........................................................................................................ 270,000
 Net operating income ..................................................................................................... $ 30,000

b.

Fixed expenses $270,000

Break-even point in dollar sales= = = $675,000
CM ratio 0.400
Margin of safety=Actual sales - Break-even sales

$750,000 - $675,000= $75,000

Margin of safety percentage= Margin of safety in dollars

Actual sales
$75,000
= 10.0%
$750,000
2. a. Hawaiian Fantasy Tahitian Joy Samoan Delight Total
Amount % Amount % Amount % Amount %
Sales ...............................................................................................................................
$500,000 100.0 $250,000 100.0 $210,000 100.0 $960,000 100.0
Less variable expenses ...................................................................................................
350,000 70.0 100,000 40.0 168,000 80.0 618,000 64.4
Contribution margin .......................................................................................................
$150,000 30.0 $150,000 60.0 $ 42,000 20.0 342,000 35.6
Less fixed expenses ........................................................................................................ 270,000
Net operating income ..................................................................................................... $ 72,000
 b.

Fixed expenses $270,000

Break-even point in dollar sales= = = $758,427
CM ratio 0.356

Margin of safety=Actual sales - Break-even sales

=$960,000 - $758,427=$201,573

Margin of safety percentage= Margin of safety in dollars

Actual sales
$201,573
= = 21.0%
$960,000

3. The reason for the increase in the break-even point can be traced to the decrease in the
company’s overall contribution margin ratio when the third product is added. Note from the
income statements above that this ratio drops from 40.0% to 35.6% with the addition of the third
product. This product (Samoan Delight) has a CM ratio of only 20.0%, which causes the average
contribution margin per dollar of sales to shift downward.

This problem shows the somewhat tenuous nature of break-even analysis when the
company has more than one product. The manager must be very careful of his or her assumptions
regarding sales mix, including the addition (or deletion) of new products.

It should be pointed out to the president that even though the break-even point is higher
with the addition of the third product, the company’s margin of safety is also greater. Notice that
the margin of safety increases from $75,000 to $201,573 or from 10.0% to 21.0%. Thus, the
addition of the new product shifts the company much further from its break-even point, even
though the break-even point is higher.

Problem 3
1. The contribution margin per unit on the first 20,000 units is:
Per Unit
Sales price $5.50
Less variable expenses 2.75
Contribution margin $2.75
The contribution margin per unit on anything over 20,000 units is:
Per Unit
Sales price $5.50
Less variable expenses 3.00
Contribution margin $2.50
Thus, for the first 20,000 units sold, the total amount of contribution margin generated
would be:
20,000 units × $2.75 per unit = $55,000
Since the fixed costs on the first 20,000 units total $70,000, the $55,000 contribution
margin above is not enough to permit the company to break even. Therefore, in order to break
even, more than 20,000 units will have to be sold. The fixed costs that will have to be covered by
the additional sales are:
Fixed costs on the first 20,000 units $70,000
Less contribution margin from the first 20,000 units 55,000
Remaining unrecovered fixed costs 15,000
Add monthly rental cost of the additional space needed to produce more
than 20,000 units 5,000
Total fixed costs to be covered by remaining sales $20,000
The additional sales of units required to cover these fixed costs would be:

Total remaining fixed costs $20,000

= = 8,000 units
Unit contribution margin on added units $2.50 per unit

Therefore, a total of 28,000 units (20,000 + 8,000) must be sold in order for the
company to break even. This number of units would equal total sales of:
28,000 units × $5.50 per unit = $154,000 in total sales.

2.
Target profit $3,000
= = 1,200 units
Unit contribution margin $2.50 per unit
Thus, the company must sell 1,200 units above the break-even point to earn a profit of
$3,000 each month. These units, added to the 28,000 units required to break even, would equal
total sales of 29,200 units each month to reach the target profit figure.

3. If a bonus of $0.05 per unit is paid for each unit sold in excess of the break-even point,
then the contribution margin on these units would drop from $2.50 to $2.45 per unit.

The desired monthly profit would be:

4.9% × ($70,000 +$5,000 ) = $3,675

Thus,

Target profit $3,675

= = 1,500 units
Unit contribution margin $2.45 per unit
Therefore, the company must sell 1,500 units above the break-even point to earn a profit of $3,675
each month. These units, added to the 28,000 units required to break even, would equal total sales
of 29,500 units each month.
 3. The difference in the ending inventory relates to a difference in the handling of fixed
manufacturing overhead costs. Under variable costing, these costs have been expensed in full as
period costs. Under absorption costing, these costs have been added to units of product at the rate
of $18 per unit ($900,000 ÷ 50,000 units produced = $18 per unit). Thus, under absorption costing
a portion of the $900,000 fixed manufacturing overhead cost of the month has been added to the
inventory account rather than expensed on the income statement:

Added to the ending inventory

(5,000 units × $18 per unit) $ 90,000
Expensed as part of cost of goods sold
(45,000 units × $18 per unit) 810,000
Total fixed manufacturing overhead cost for the month $900,000

Because $90,000 of fixed manufacturing overhead cost has been deferred in inventory
under absorption costing, the net operating income reported under that costing method is $90,000
higher than the net operating income under variable costing, as shown in parts (1) and (2) above.

Problem 4

1. Superior Company
Schedule of Cost of Goods Manufactured
For the Year Ended December 31

Direct materials:
Raw materials inventory, beginning $ 13,000
Add: Purchases of raw materials 155,000
Raw materials available for use 168,000
Deduct: Raw materials inventory, ending 18,000
Raw materials used in production $150,000
Direct labor 61,000 *
Manufacturing overhead:
Insurance, factory 4,500
Utilities, factory 20,000
Indirect labor 36,000
Cleaning supplies, factory 3,000
Rent, factory building 100,000
Maintenance, factory 25,000
Total overhead costs 188,500
Total manufacturing costs 399,500
Add: Work in process inventory, beginning 25,000 *
424,500
Deduct: Work in process inventory, ending 21,500
Cost of goods manufactured $403,000
 Finished goods inventory, beginning $ 31,000
Add: Cost of goods manufactured 403,000 *
Goods available for sale 434,000
Deduct: Finished goods inventory, ending 28,400 *
Cost of goods sold $405,600

* These items must be computed by working backwards up through the statements.

2. Direct materials: $150,000 ÷ 25,000 units = $6.00 per unit.

Rent, factory building: $100,000 ÷ 25,000 units = $4.00 per unit.

3. Per Unit Total

Direct materials $6.00 (Same) $120,000 ** (Changed)
Rent, factory building $5.00 * (Changed) $100,000 (Same)

* $100,000 ÷ 20,000 units = $5.00 per unit.

** $6.00 per unit × 20,000 units = $120,000.

4. The average cost per unit for rent rose from $4.00 to $5.00, because of the decrease in
production between the two years. Since fixed costs do not change in total as the activity level
changes, they will increase on a unit basis as the activity level falls.

Problem 5

1. January—Low April—High
7,200 Units 9,000 Units
Direct materials cost @ $3.60 per unit $ 25,920 $ 32,400
Direct labor cost @ $7.50 per unit 54,000 67,500
Manufacturing overhead cost* 145,980 163,800
Total manufacturing costs 225,900 263,700
Add: Work in process, beginning 4,500 14,400
230,400 278,100
Deduct: Work in process, ending 5,400 8,100
Cost of goods manufactured $225,000 $270,000

*Computed by working upwards through the statements.

2. Units Produced Cost Observed

April—High activity level 9,000 $163,800
 January—Low activity level 7,200 145,980
Change 1,800 $ 17,820

Change in cost $17,820

Variable cost = = = $9.90 per unit
Change in activity 1,800 units
Total cost at the high level of activity $163,800
Less variable cost element
(9,000 units × $9.90 per unit) 89,100
Fixed cost element $ 74,700

Therefore, the cost formula is: $74,700 per month, plus $9.90 per unit produced or
Y = $74,700 + $9.90X,
where X represents the number of units.

3. The cost of goods manufactured if 8,400 units are produced:

Direct materials cost

($3.60 per unit × 8,400 units) $ 30,240
Direct labor cost ($7.50 per unit × 8,400 units) 63,000
Manufacturing overhead cost:
Fixed portion $74,700
Variable portion ($9.90 per unit × 8,400 units) 83,160 157,860
Total manufacturing cost 251,100
Add: Work in process, beginning 0
251,100
Deduct: Work in process, ending 0
Cost of goods manufactured $251,100

Problem 6
1. Maintenance cost at the 16,000 machine-hour level of activity can be isolated as
follows:

Level of Activity
4,000 MHs 16,000 MHs
Total factory overhead cost $93,120 $166,200
Deduct:
Utilities cost @ $2.88 per MH* 11,520 46,080
Supervisory salaries 15,600 15,600
Maintenance cost $66,000 $104,520

*$11,520 ÷ 4,000 MHs = $2.88 per MH

2. High-low analysis of maintenance cost:

 Machine-Hours Maintenance Cost
High activity level 16,000 $104,520
Low activity level 4,000 66,000
Change 12,000 $ 38,520

Variable cost:

Change in cost $38,520

= =$3.21 per MH.
Change in activity 12,000 MHs
Total fixed cost:

Total maintenance cost at the high activity level $104,520

Less variable cost element
(16,000 MHs × $3.21 per MH) 51,360
Fixed cost element $ 53,160

Therefore, the cost formula for maintenance is: $53,160 per month plus $3.21 per
machine-hour or
Y = $53,160 + $3.21X,
where X represents machine-hours.

Variable Cost per

3. Machine-Hour Fixed Cost
Maintenance cost $3.21 $53,160
Utilities cost 2.88
Supervisory salaries cost 15,600
Totals $6.09 $68,760

Thus, the cost formula would be: Y = $68,760 + $6.09X.

4. Total overhead cost at an activity level of 15,000 machine-hours:

Fixed cost $ 68,760

Variable cost: $6.09 per MH × 15,000 MHs 91,350
Total overhead cost $160,110

Problem 7
1. Maintenance cost at the 6,000 direct labor-hour level of activity can be isolated as
follows:

Level of Activity
 5,000 DLHs 6,000 DLHs
Total factory overhead cost ¥14,000,000 ¥15,150,000
Deduct:
Indirect materials @ ¥500 per DLH* 2,500,000 3,000,000
Rent 7,000,000 7,000,000
Maintenance cost ¥ 4,500,000 ¥ 5,150,000

* ¥2,500,000 ÷ 5,000 DLHs = ¥500 per DLH

2. High-low analysis of maintenance cost:

Direct Labor-Hours Maintenance Cost

High activity level 6,000 ¥5,150,000
Low activity level 5,000 4,500,000
Change 1,000 ¥ 650,000

Variable cost element:

Change in cost ¥650,000

= =¥650 per DLH
Change in activity 1,000 DLHs
Fixed cost element:

Total cost at the high activity level ¥5,150,000

Less variable cost element
( ¥650 per DLH × 6,000 DLHs) 3,900,000
Fixed cost element ¥1,250,000

Therefore, the cost formula for maintenance is: ¥1,250,000 per year plus ¥650 per direct
labor-hour or
Y = ¥1,250,000 + ¥650X

3. Total factory overhead cost at 5,200 direct labor-hours would be:

Indirect materials
(5,200 DLHs × ¥500 per DLH) ¥ 2,600,000
Rent 7,000,000
Maintenance:
Variable cost element
(5,200 DLHs × ¥650 per DLH) ¥3,380,000
Fixed cost element 1,250,000 4,630,000
Total factory overhead cost ¥14,230,000
Problem 8

1. a. Raw Materials 150,000

Cash 150,000

b. Work in Process 135,000

Manufacturing Overhead 23,000
Raw Materials 158,000

c. Work in Process 100,000

Manufacturing Overhead 40,000
Sales Commissions Expense 22,000
Salaries Expense 35,000
Cash 197,000

d. Manufacturing Overhead 30,000

Rent Expense 6,000
Cash 36,000

e. Manufacturing Overhead 90,000

Cash 90,000

f. Advertising Expense 88,000

Cash 88,000

g. Manufacturing Overhead 66,000

Depreciation Expense 14,000
Accumulated Depreciation 80,000

h. Work in Process 250,000

Manufacturing Overhead 250,000

Estimated manufacturing
overhead cost Rmb275,000
= = 250% of direct labor cost.
Estimated direct labor cost Rmb110,000

Rmb100,000 actual direct labor cost × 250% = Rmb250,000.

i. Finished Goods 490,000
Work in Process 490,000

j. Cash 995,000
Sales 995,000
 Cost of Goods Sold 550,000
Finished Goods 550,000

2.
Raw Materials Work in Process
Bal. 13,000 (b) 158,000 Bal. 30,000 (i) 490,000
(a) 150,000 (b) 135,000
Bal. 5,000 (c) 100,000
(h) 250,000
Bal. 25,000

Finished Goods Manufacturing Overhead

Bal. 65,000 (j) 550,000 (b) 23,000 (h) 250,000
(i) 490,000 (c) 40,000
Bal. 5,000 (d) 30,000
(e) 90,000
(g) 66,000
Bal. 1,000

Cost of Goods Sold

(j) 550,000

3. Manufacturing overhead is overapplied by Rmb1,000 for the year. The entry to close
this balance to Cost of Goods Sold would be:

Manufacturing Overhead 1,000

Cost of Goods Sold 1,000

4.
Gold Nest Company
Income Statement
Sales Rmb995,000
Less cost of goods sold (Rmb550,000 – Rmb1,000) 549,000
Gross margin 446,000
Less selling and administrative expenses:
Sales commissions Rmb22,000
Administrative salaries 35,000
Rent expense 6,000
Advertising expense 88,000
Depreciation expense 14,000 165,000
Net operating income Rmb281,000
Problem 9

Estimated manufacturing overhead cost $380,000

1 = = $8.00 per MH
.
Estimated machine-hours 47,500 MHs

2. The amount of overhead cost applied to Work in Process for the year would be: 45,000
machine-hours × $8.00 per machine-hour = $360,000. This amount is shown in entry (a) below:

Manufacturing Overhead
(Maintenance) 47,000 (a) 360,000
(Indirect materials) 20,000
(Indirect labor) 105,000
(Utilities) 77,500
(Insurance) 26,000
(Depreciation) 91,500
Balance 7,000

Work in Process
(Direct materials) 980,000
(Direct labor) 170,000
(Overhead) (a) 360,000

3. Overhead is underapplied by $7,000 for the year, as shown in the Manufacturing

Overhead account above. The entry to close out this balance to Cost of Goods Sold would be:

Cost of Goods Sold 7,000

Manufacturing Overhead 7,000
4. When overhead is applied using a predetermined rate based on machine-hours, it is
assumed that overhead cost is proportional to machine-hours. So when the actual machine-hours
turn out to be 45,000, the costing system assumes that the overhead will be 45,000 machine-hours
× $8.00, or $360,000. This is a decrease of $20,000 from the initial estimated manufacturing
overhead cost of $380,000. However, the actual manufacturing overhead did not decrease by this
much. The actual manufacturing overhead was $367,000—a decrease of $13,000 from the
estimate. The manufacturing overhead did not decline by the full $20,000 because of the existence
of fixed costs and/or because overhead spending was not under control. These issues will be
covered in more detail in later chapters.

Problem 10
1. The company’s estimated total direct labor-hours for the year can be computed as
follows:
 Deluxe model: 10,000 units × 2.0 DLH per unit 20,000
Regular model: 50,000 units × 1.0 DLH per unit 50,000
Total direct labor-hours 70,000

Using direct labor-hours as the allocation base, the predetermined overhead rate would
be:

Predetermined = Total manufacturing overhead

overhead rate Total direct labor-hours
$3,080,000
= = $44 per DLH
70,000 DLHs
The unit product costs are computed as follows:

Deluxe Regular
Direct materials $ 50 $30
Direct labor 30 15
Manufacturing overhead:
$44 per DLH × 2.0 DLHs 88
$44 per DLH × 1.0 DLHs 44
Unit product cost $168 $89

2. Activity rates can be computed as follows:

(a)
Estimated (b) (a) ÷ (b)
Overhead Expected Activity
Activity Cost Pool Cost Activity Rate
Purchase orders $60,000 1,500 orders $40 per order
Rework requests $280,000 2,800 requests $100 per request
Product testing $240,000 10,000 tests $24 per test
Machine related $2,500,000 12,500 MHs $200 per MH
3.
a. Deluxe Regular
Expected Expected
Activity Amount Activity
Purchase orders, at $40 per order 500 $ 20,000 1,000
Rework requests, at $100 per request 800 80,000 2,000
Product testing, at $24 per test 7,000 168,000 3,000
Machine related, at $200 per MH 4,500 900,000 8,000
Total overhead cost assigned (a) $1,168,000
Number of units produced (b) 10,000
 Overhead cost per unit (a) ÷ (b) $116.80
b. Using activity-based costing, the unit product costs would be:

Deluxe Regular
Direct materials $ 50.00 $30.00
Direct labor 30.00 15.00
Manufacturing overhead 116.80 38.24
Unit product cost $196.80 $83.24

4. Unit product costs are distorted as a result of using direct labor-hours as the base for
applying overhead costs to products. Although the deluxe model requires twice as much labor as
the regular model, it still is not being assigned enough overhead cost according to the
activity-based costing system.

According to the activity-based costing system, the deluxe model is more expensive to
manufacture than the company thought. Note that the deluxe model accounts for 36% of the
machine-hours worked, although it represents a small part of the company’s total output. Also, it
consumes a disproportionately large amount of the other activities.

When activity-based costing is used in place of direct labor-hours as the basis for
assigning overhead cost to products, the unit product cost of the deluxe model jumps up from
$168.00 to $196.80. If the $168.00 figure is being used as the basis for pricing, then the selling
price may be too low for the deluxe model. This may be the reason why profits have been
declining for the last several years. It may also be the reason why sales of the deluxe model have
been increasing rapidly.

Problem11
1. The activity rates are computed as follows:

(a)
Estimated (b) (a) ÷ (b)
Overhead Expected Activity
Activity Cost Pool Cost Activity Rate
Labor related $200,000 20,000 DLHs $10 per DLH
Production orders $110,000 5,000 orders $22 per order
Material receipts $108,000 1,800 receipts $60 per receipt
Relay assembly $960,000 12,000 relays $80 per relay
General factory $1,260,000 70,000 MHs $18 per MH

2. a. The journal entry to record actual manufacturing overhead costs is:

Manufacturing Overhead 2,704,000

 Accounts Payable 2,704,000

Manufacturing Overhead
(2a) 2,704,000

b. The manufacturing overhead applied is computed as follows:

(a) (b) (a) × (b)

Activity Actual Applied
Activity Cost Pool Rate Activity Overhead
Labor related $10 per DLH 22,000 DLHs $ 220,000
Production orders $22 per order 4,500 orders 99,000
Material receipts $60 per receipt 2,000 receipts 120,000
Relay assembly $80 per relay 13,000 relays 1,040,000
General factory $18 per MH 73,000 MHs 1,314,000
Total $2,793,000
c. The journal entry to record applied manufacturing overhead is:

Work in Process 2,793,000

Manufacturing Overhead 2,793,000

Manufacturing Overhead
(2a) 2,704,000 (2c) 2,793,000

d. The overhead is overapplied by $89,000. This can be determined from the

T-account or directly:

Manufacturing Overhead
(2a) 2,704,000 (2c) 2,793,000
89,000

Actual overhead incurred $2,704,000

Overhead applied 2,793,000
Overhead overapplied $ (89,000)

3. a. Overhead cost is applied to the products as follows:

Product A
(a) (b) (a) × (b)
Activity Actual Applied
Activity Cost Pool Rate Activity Overhead
Labor related $10 per DLH 7,000 DLHs $ 70,000
 Production orders $22 per order 800 orders 17,600
Material receipts $60 per receipt 400 receipts 24,000
Relay assembly $80 per relay 3,500 relays 280,000
General factory $18 per MH 16,000 MHs 288,000
Total $679,600
Product B
(a) (b) (a) × (b)
Activity Actual Applied
Activity Cost Pool Rate Activity Overhead
Labor related $10 per DLH 1,000 DLHs $ 10,000
Production orders $22 per order 900 orders 19,800
Material receipts $60 per receipt 800 receipts 48,000
Relay assembly $80 per relay 2,000 relays 160,000
General factory $18 per MH 26,000 MHs 468,000
Total $705,800

Product C
(a) (b) (a) × (b)
Activity Actual Applied
Activity Cost Pool Rate Activity Overhead
Labor related $10 per DLH 8,000 DLHs $ 80,000
Production orders $22 per order 1,100 orders 24,200
Material receipts $60 per receipt 300 receipts 18,000
Relay assembly $80 per relay 3,000 relays 240,000
General factory $18 per MH 17,000 MHs 306,000
Total $668,200

Product D
(a) (b) (a) × (b)
Activity Actual Applied
Activity Cost Pool Rate Activity Overhead
Labor related $10 per DLH 6,000 DLHs $ 60,000
Production orders $22 per order 1,700 orders 37,400
Material receipts $60 per receipt 500 receipts 30,000
Relay assembly $80 per relay 4,500 relays 360,000
General factory $18 per MH 14,000 MHs 252,000
Total $739,400

b. The total amount applied to the products ($679,600 + $705,800 + $668,200 +

$739,400 = $2,793,000) is the same as the total manufacturing overhead applied that appears as
the credit entry in the manufacturing overhead T-account.
Problem 12
Weighted-Average Method
1. The computation of equivalent units would be:

Quantity Equivalent Units (EU)

Schedule Materials Labor Overhead
Units accounted for as follows:
Transferred to the next department 68,000 68,000 68,000 68,000
Work in process, June 30 (materials 50%
complete, labor and overhead 20% complete)
6,000 3,000 1,200 1,200
Total units and equivalent units of production
74,000 71,000 69,200 69,200

2. The cost reconciliation follows:

Total Equivalent Units (EU)

Cost Materials Labor Overhead
Cost accounted for as follows:
Transferred to the next department: 68,000
units × $1.70 per unit $115,600 68,000 68,000 68,000
Work in process, June 30:
Materials, at $0.85 per EU 2,550 3,000
Labor, at $0.35 per EU 420 1,200
Overhead, at $0.50 per EU 600 1,200
Total work in process 3,570
Total cost $119,170

Problem13
Weighted-Average Method
1. The equivalent units for the month would be:

Quantity Equivalent Units (EU)

Schedule Materials Conversion
Units accounted for as follows:
Transferred to next department 155,000 155,000 155,000
Work in process, April 30 (materials 100% complete;
conversion 30% complete) 6,000 6,000 1,800
Total units and equivalent units of production 161,000 161,000 156,800

2. Total Cost Materials Conversion Whole Unit

Work in process, April 1 $ 22,810 $ 19,450 $ 3,360
 Cost added during the month 599,000 375,000 224,000
Total cost (a) $621,810 $394,450 $227,360

Equivalent units of production (b) 161,000 156,800

Cost per EU (a) ÷ (b) $2.45 + $1.45 = $3.90

3. Total units transferred 155,000

Less units in the beginning inventory 11,000
Units started and completed during April 144,000
4. No, the manager should not be rewarded for good cost control. The reason for the Mixing
Department’s low unit cost for April is traceable to the fact that costs of the prior month have been
averaged in with April’s costs in computing the lower, $2.45 per unit figure. This is a major
criticism of the weighted-average method in that the figures computed for product costing
purposes can’t be used to evaluate cost control or measure performance for the current period.