You are employed by Spirit Company, a manufacturer of digital watches. The company's chief financial officer is trying to verify the accuracy of the ending work in process and finished goods inventories prior to closing the books for the year. You have been asked to assist in this verification. The year-end balances shown on Spirit Company's books are as follows:
Units
Costs
Work in process, December 31
(labour and overhead 50% complete)
300,000
$660,960
Finished goods, December 31
200,000
$1,009,800
Materials are added to production at the beginning of the manufacturing process, and overhead is applied to each product at the rate of 60% of direct labour cost. There was no finished goods inventory at the beginning of the year. A review of Spirit Company's inventory and cost records has disclosed the following data:
Costs
Units
Materials
Labour
Work in process, January 1
(labour and overhead 80% complete)
200,000
$200,000
$315,000
Units started into production
1,000,000
Cost added during the year:
Materials cost
$1,300,000
Labour cost
$1,995,000
Units completed during the year
900,000
The company uses the weighted-average method.
Required: Keep all calculations to 2 decimal places.
1. Calculate the total equivalent units and costs per equivalent unit for each of the following: materials, labour, and overhead for the year.
2. Calculate cost of the ending work in process and finished goods inventories.
3. Prepare the necessary correcting journal entry to adjust the work in process and the finished goods inventories to reflect their correct balances (amounts) as of 31 December
4. Calculate the cost of goods sold for the year assuming there is no underapplied or overapplied overhead.