Unit 3: Process Costing Module 5: Process Costing - Equivalent Units
The work of the period in process costing
1) The work needed to complete the beginning WIP 2) The work needed to both start and complete some units 3) The work put into units that are started but not yet completed (The ending WIP)
Bullzai Company makes paint. It has two departments—mixing and coloring. Its production records for December were as follows: Beginning inventory: 400 gallons of paint at 40% completed Started and completed during December: 12,000 gallons Ending inventory: 500 gallons at 20% complete What is Bullzai's equivalent number of gallons of paint produced in December?
12,340
What is the beverage company's equivalent units for conversion costs of beginning inventory? Beginning Inv *Direct materials 5k gallons at 100% complete *Direct labor 5k gallons at 30% complete *Manufacturing overhead 5k gallons at 30% Started and Completed *Direct materials 30k gallons *Direct labor 30k gallons *Manufacturing overhead 30k gallons Ending Inv *Direct materials 1000 gallons at 100% *Direct labor 1000 gallons at 40% complete *Manufacturing overhead 1000 gallons at 40% Total Costs Direct materials $20,000 Conversion costs $10,500 Direct materials $120,000 Conversion costs $343,000 equivalent units for direct materials of beginning inventory 5k gallons cost per equivalent unit for direct materials in beg inv $4.00
1500 The equivalent units for conversion costs of the beg inv is 30% times 5k
The nature of the production process for materials and conversion costs is different so
equivalent units of materials and conversion cost production must be computed separately
The equivalent units of production put into the ending WIP is based on
the fraction completed before the end of the period
Total production cost is
the sum of the cost in beg inv and the production costs added this period to both the goods transferred out and in ending inv
The number of equivalent units of production this period is
the sum of the work to complete the beginning WIP inventory, the work the both start and complete some units, and the work put into units not yet completed (ending WIP)
Here are data for Kretsmart for the month of March: Direct material costs: $14,800 Direct labor costs: $72,000 Manufacturing overhead: $13,200 What was Kretsmart's total cost of production for the month of March?
$100k
Given the equivalent units at 5k gallons, what was the cost per equivalent unit for direct materials in beg inv? Beginning Inv *Direct materials 5k gallons at 100% complete *Direct labor 5k gallons at 30% complete *Manufacturing overhead 5k gallons at 30% Started and Completed *Direct materials 30k gallons *Direct labor 30k gallons *Manufacturing overhead 30k gallons Ending Inv *Direct materials 1000 gallons at 100% *Direct labor 1000 gallons at 40% complete *Manufacturing overhead 1000 gallons at 40% Total Costs Direct materials $20,000 Conversion costs $10,500 Direct materials $120,000 Conversion costs $343,000
$4.00 The amount spend on beg inv for materials was $20k divided by the 5k equivalent number of units, so the equivalent unit cost is $4 for direct materials in ben inv
What is the beverage company's cost per equivalent unit for conversion costs for beginning inventory? Beginning Inv *Direct materials 5k gallons at 100% complete *Direct labor 5k gallons at 30% complete *Manufacturing overhead 5k gallons at 30% Started and Completed *Direct materials 30k gallons *Direct labor 30k gallons *Manufacturing overhead 30k gallons Ending Inv *Direct materials 1000 gallons at 100% *Direct labor 1000 gallons at 40% complete *Manufacturing overhead 1000 gallons at 40% Total Costs Direct materials $20,000 Conversion costs $10,500 Direct materials $120,000 Conversion costs $343,000 equivalent units for direct materials of beginning inventory 5k gallons cost per equivalent unit for direct materials in beg inv $4.00 equivalent units for conversion costs of beginning inventory 1500
$7.00 The beg inv was 30% done and cost $10,500. The equivalent units was 1500 in conversation costs at the beg of the period so the cost is $7 per unit 10,500 times 1500
Here are data for Bullzai for the month of January: Direct material costs: $14,800 Direct labor costs: $72,000 manufacturing Overhead: $13,200 What is Bullzai's total conversion costs for the period?
$85,200 Represents the total DL and manufacturing overhead costs
0 / 1 Here are data for Herbert Phone Company: Conversion costs this period: $497,280 Beginning inventory: 1,000 at 40% complete as to conversion costs Started and completed: 30,000 units Ending inventory: 800 units at 60% complete as to conversion costs Given these data, what is Herbert's cost per equivalent units for conversion costs for the period?
16.00 The beginning inventory this period was 60% × 1,000 units, or 600. This 600 is added to the 30,000 that were started and completed and 60% of the 800 units in ending inventory, so the correct answer is 600 + 30,000 + 480 = 31,080. This 31,080 divided into $497,280 is $16.
Alliah Company is a tax preparation firm that prepares tax returns for individuals. It has 12 tax return preparers who can each prepare approximately 20 returns per day. Its tax return productivity for the month of February is as follows: Beginning tax returns in process as of February 1: 15 returns at 30% complete Started and completed tax returns: 2790 returns Ending tax returns in process as of February 28: 30 returns at 40% complete What is Alliah Company's total equivalent number of returns for the month of February?
2812.5
Quality Apple Farms manufactures gallons of apple cider. During Feb, it had the following production results: Beginning Inv *Direct materials 5k gallons at 100% complete *Direct labor 5k gallons at 30% complete *Manufacturing overhead 5k gallons at 30% Started and Completed *Direct materials 30k gallons *Direct labor 30k gallons *Manufacturing overhead 30k gallons Ending Inv *Direct materials 2000 gallons at 100% *Direct labor 2000 gallons at 40% complete *Manufacturing overhead 2000 gallons at 40% What is Quality Apple Farms equivalent number of units for direct materials?
32,000 gallons Bc the 5k gallons in beginning inv were already completed, the equivalent number of units for direct materials is the gallons started and completed plus the 100% completion of the ending inv for a total of 32k
FIFO assumption in process costing
The assumption that all beginning WIP inventory is completed before any new units are started
Quality Apple Farms manufactures gallons of apple cider. During Feb, it had the following production results: Beginning Inv *Direct materials 5k gallons at 100% complete *Direct labor 5k gallons at 30% complete *Manufacturing overhead 5k gallons at 30% Started and Completed *Direct materials 30k gallons *Direct labor 30k gallons *Manufacturing overhead 30k gallons Ending Inv *Direct materials 2000 gallons at 100% *Direct labor 2000 gallons at 40% complete *Manufacturing overhead 2000 gallons at 40% What is Quality Apple Farm's equivalent number of units for conversion costs?
34,300 gallons - 70% of the 5k in beg inv was completed for 3500 equivalent units; 30k gallons were started and completed; and 40% of 2,000 gallons were completed for 800 equivalent units. So, the correct answer is 3,500 plus 30,000 plus 800, or 34,300 gallons. (70% × 5,000) + 30,000 + (40% × 2,000) = 34,300.
Plairtrack Company has determined its equivalent number of units for the month of March is as follows: Beginning inventory (50% complete): 1,000 units Started and completed: 35,000 units Ending inventory (50% complete): 2,000 units Both material costs and conversion costs are added evenly throughout the production process. What is Plairtrack's total equivalent number of units for the month of March?
36,500
Here are data for Endothon for the month of June: Beginning inventory: 2000 cases 30% completed Started and completed: 38,000 cases Ending inventory of gum: 3,000 cases 60% completed What is Endothon's equivalent units of production for June?
41,200
Beginning Inv *Direct materials 4000 cans at 100% complete *Direct labor 4000 cans at 40% complete *Manufacturing overhead 4000 cans at 40% Started and Completed *Direct materials 40000 cans *Direct labor 40000 cans *Manufacturing overhead 40000 cans Ending Inv *Direct materials 2000 cans at 100% complete *Direct labor 2000 cans at 30% complete *Manufacturing overhead 2000 cans at 30%What is Endothon's equivalent number of direct materials?
42,000 cans The beg inv was 100% complete for Dec started, and the ending inv is 100$ complete in Dec, so the equivalent number of units for direct materials is 42,000
Endothon, a paint manufacturer, had the following production in December: Beginning Inv *Direct materials 4000 cans at 100% complete *Direct labor 4000 cans at 40% complete *Manufacturing overhead 4000 cans at 40% Started and Completed *Direct materials 40000 cans *Direct labor 40000 cans *Manufacturing overhead 40000 cans Ending Inv *Direct materials 2000 cans at 100% complete *Direct labor 2000 cans at 30% complete *Manufacturing overhead 2000 cans at 30% What is the equivalent number of units for Endothon's conversion costs for December?
43,000 cans The equivalent number of units for conversion costs is 60% times 4k cans of beg inv plus 40k units started and finished plus 30% of the 2k cans in ending inv for a total of 2,400 cans of beginning inv
Orange Zest Café makes premixed protein drinks that are sold in grocery stores. Its records for December contained the following information: Beginning work-in-process: 3,000 cases at 100% complete for direct materials and 60% for conversion costs Started and completed: 46,000 cases Ending work-in-process: 2,000 cases at 100% complete for direct materials and 70% for conversion costs What is Orange Zest Café's direct materials equivalent units of production for December?
48,000
Orange Zest Café makes premixed protein drinks that are sold in grocery stores. Its records for December contained the following information: Beginning work-in-process: 3,000 cases at 100% complete for direct materials and 60% for conversion costs Started and completed: 46,000 cases Ending work-in-process: 2,000 cases at 100% complete for direct materials and 70% for conversion costs Direct materials equivalent units of production is 48k cases What is their conversion cost equivalent units of production for Decembee
48,600
A beverage company that produces apple cider had the following production and cost results in Feb Beginning Inv *Direct materials 5k gallons at 100% complete *Direct labor 5k gallons at 30% complete *Manufacturing overhead 5k gallons at 30% Started and Completed *Direct materials 30k gallons *Direct labor 30k gallons *Manufacturing overhead 30k gallons Ending Inv *Direct materials 1000 gallons at 100% *Direct labor 1000 gallons at 40% complete *Manufacturing overhead 1000 gallons at 40% Total Costs Direct materials $20,000 Conversion costs $10,500 Direct materials $120,000 Conversion costs $343,000 Give the production data for this period what is the equivalent units for direct materials of beginning inventory?
5k gallons The equivalent number of units for direct materials of the beg inv is 100% times 5000
Here are data for Alliah Paint for the month of February: Beginning cans of paint: 2,000 that were 20% completed Started and finished cans of paint: 90,000 cans of paint Started but only 30% completed: 15,000 cans of paint What is Alliah Paint's equivalent number of cans of paint in February?
96,100
Equivalent units of production
A method used in process costing systems to measure the production output during a period; essentially the "work done" by the center or department in terms of units of output
Conversion Costs
The costs of converting raw materials to finished products; these include DL and manufacturing overhead costs
What is the relationship between equivalent number of units for direct materials?
The equivalent number of units for direct materials is usually different from the equivalent number of units for conversion costs
What happens to the total production costs remaining in work-in-process inventory at the end of the period?
They are carried forward as beginning WIP inventory for the next period
Total production cost per equivalent unit is
assigned to the units worked on this period
