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##### Dick Cheney's company

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Question;Dick Cheney's company?s CFO is trying to verify the accuracy of the ending WIP 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?s books are as follows:Units CostsWIP, 12/31 (conversion 50% complete) 300,000 \$ 660,960Finished Goods, 12/31 200,000 \$1,009,800Materials 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 labor cost. There was no Finished Goods inventory at the beginning of the year (all prior year finished goods were sold). A review of Cheneys inventory and cost records has disclosed the following data:Direct Costs Units Materials LaborWIP, January 1 (conversion 80% complete) 200,000 \$200,000 \$315,000Units started into production 1,000,000Costs added during the year:Materials cost \$1,300,000Labor cost \$1,995,000Units completed during the year 900,000The company uses the weighted average method.Required (support your work):a) Determine the equivalent units and costs per equivalent unit for inventory costs.b) Are the ending cost balances in the WIP and Finished Goods inventory as shown (note: the unit amount ending balances are correct)? If they are not correct, what should the ending cost balances be?c) Determine the cost of goods sold for the year (assume no over- or under-applied overhead).

Paper#43706 | Written in 18-Jul-2015

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