Reference no: EM132789899

Question - You are employed by SQ 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 the company's books are as follows:

Units Costs

Work-in-process, Dec 31, (50% complete as to labour and overhead) 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 the company's inventory and cost records has disclosed the following data, all of which are accurate:

Units Material Cost Labour Cost

Work-In-Process, January 01 (80% complete as to labour and overhead) 200,000 200,000 315,000

Units started into production 1,000,000

Cost added during the year:

Material Cost 1,300,000

Labour Cost 1,995,000

Units completed during the year 900,000

The company uses weighted average cost method.

Required -

a) Determine the equivalent units and costs per equivalent unit for materials, labour and overhead for the year.

b) Determine the amount of cost that should be assigned to the ending work in process and finished goods inventories

c) Adjust the work in process and finished goods inventories to the correct balances as of December 31.

d) Determine the cost of goods sold for the year assuming there is no under or over applied overhead.