Question

The production department in a process manufacturing system completed 80,000 units of product and transferred them to finished goods during a recent period. Of these units, 24,000 were in process at the beginning of the period. The other 56,000 units were started and completed during the period. At period-end, 16,000 units were in process. Compute the department’s equivalent units of production with respect to direct materials under each of three separate assumptions using the weighted-average method:

1. All direct materials are added to products when processing begins.
2. Beginning inventory is 40% complete as to materials and conversion costs. Ending inventory is 75% complete as to materials and conversion costs.
3. Beginning inventory is 60% complete as to materials and 40% complete as to conversion costs. Ending inventory is 30% complete as to materials and 60% complete as to conversion costs.

Short answer

Total EUP is $96,000

Total EUP is$92,000

Total EUP is $88,000

Step-by-step solution

(1) Meaning of direct materials.

Direct materials are the resources and materials used to produce a product that can be immediately linked to that product. Typically, a product's bill of materials contains a list of the materials recognized as direct materials.

Meaning of Weighted average method.

A weighted average computation accounts for the shifted levels of importance of the numbers in a data collection. Each value increases a specified weight within the data set before the ultimate computation is completed when calculating a weighted average.

Computing total EUP.

EUP for materials
Goods completed$\left(80,000\mathrm{EUP}\times 100\%\right)$	80,000
Ending goods in process$\left(16,000\mathrm{EUP}\times 100\%\right)$	16,000
Total EUP	$96,000

(2) Meaning of Conversion cost

An estimate of the direct labor cost and burden associated with processing raw materials into finished products.

Meaning of Weighted average method.

The changing relevance levels of the numbers in a data collection are considered using a weighted average calculation.

Determining total EUP.

EUP for materials
Goods completed	80,000
Ending goods in process	12,000
Total EUP	$92,000

(3) Meaning of Conversion cost.

Estimate the burden and direct labor costs related to turning raw resources into finished goods.

Meaning of weighted average method.

The changing relevance levels of the numbers in a data collection are considered using a weighted average calculation. When calculating a weighted average, each value increases a predetermined weight inside the data set before the final computation is finished.

Determining total EUP.

EUP for materials
Goods completed	80,000
Ending goods in process	8,000
Total EUP	$88,000