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Laredo Leather Company Assignment: Units

The document discusses the production costs for Laredo Leather Company for October. It provides the work-in-progress (WIP) and finished goods units for October 1st and 31st. It then calculates the equivalent units for materials and conversion costs. The total production costs are assigned to the October 31st WIP and goods transferred out. The weighted average unit cost of completed belts is calculated. The production manager suggests reporting a higher WIP completion percentage, but this would complicate the accounting and require more departments.

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325 views4 pages

Laredo Leather Company Assignment: Units

The document discusses the production costs for Laredo Leather Company for October. It provides the work-in-progress (WIP) and finished goods units for October 1st and 31st. It then calculates the equivalent units for materials and conversion costs. The total production costs are assigned to the October 31st WIP and goods transferred out. The weighted average unit cost of completed belts is calculated. The production manager suggests reporting a higher WIP completion percentage, but this would complicate the accounting and require more departments.

Uploaded by

mans
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
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Laredo Leather Company Assignment

STEPS
UNITS

1-Oct Units % of completion


WIP 400 25%
Started 7600
PU to be accounted
for 8000

31st Oct
FG 7000 100%
WIP 1000 50%
PU to be accounted
for 8000
Total EU

Equivalent Units (EU)

1-Oct Direct Material Conversion


WIP 400 100

31st Oct FG 7000 7000


WIP 1000 500

Total 8000 7500

ANSWERS
Equivalent
Units for
1) material = 8000 Units
Equivalent
Units for
conversion= 7500 Units

Cost per
Equivalent
Units of
2) material= $3.14

Cost per
Equivalent
Units of
Conversion= $2.76

3) Assignment of production costs to the October 31 WIP and to goods transferred out

Cost of goods completed and transferred out= FG* Total cost per EU=

Costs remaining in WIP on 31st Oct=


Direct Material = 1000 EU * $3.14 DM cost pe
Conversion Costs= 500 EU * $2.76 Conversion
Total cost of Oct 31st WIP=

Total costs accounted for =

4) The weighted-average unit cost of leather belts completed and transferred to finished goods. Com
on the company’s cost per belt used for planning and control.

Weighted Average Unit cost of leather belts completed and transferred to FG = $41

Cost per belt used for planning and control = $5.35


This is $0.55 less than the actual cost per belt.
Hence the estimation of he cost of 7000 units of FG inventory f

5) The Production manager is suggesting 60% completion of WIP instead of 50%.


This leads to reduction in unit conversion cost of 1%. It would
be an improvement and he would be able to show progress in the next meeting.
However, this leads to differences in the accounts, and would require the involvement
of not just the production manager and the coroporate controller, but also several members of th
as well as the production department.
In addition to the complexities of tallying accounts and actual expenses, as well as the involveme
COSTS

Costs

Direct
Material Conversion Cost of the
1-Oct Costs Costs inventory
WIP $1,250 $300 $1,550

31st Oct
FG
WIP

Total Costs $25,150 $20,700 $45,850

Costs per EU
Conversion Total Cost /
1-Oct DM cost /EU cost/EU EU
WIP $3.13 $3 $6.13

31st Oct FG
WIP

Total $3.14 $2.76 $5.90


sferred out

* Total cost per EU= $41,326.25

00 EU * $3.14 DM cost per EU = $3,143.75


0 EU * $2.76 Conversion costs per EU = $1,380.00
$4,523.75

$45,850.00

ed to finished goods. Comment

d transferred to FG = $41,326.25 assigned to FG / 7000 units of FG


$5.90 per belt

00 units of FG inventory for oc 31st will be less b $ 3850

e involvement
so several members of the accounts department

as well as the involveme

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