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Chapter 16: Q18E (page 751)

RSTN Co. produces its product through two sequential processing departments. Direct materials and conversion are added to the product evenly throughout the process. The company uses monthly reporting periods for its process costing system.
During October, the company finished and transferred 150,000 units of its product to Department 2. Of these units, 30,000 were in process at the beginning of the month and 120,000 were started and completed during the month. The beginning work in process inventory was 30% complete. At the end of the month, the work in process inventory consisted of 20,000 units that were 80% complete.
Compute the number of equivalent units of production for October. Use the FIFO method.

Short Answer

Expert verified

Equivalent units of production

Direct material:140,000 units

Conversion:157,000 units

Step by step solution

01

Definition of FIFO

A method used to determine the value of inventory under which the goods purchased by the business entity first are sold out first is known as FIFO.

02

Calculation of the number of equivalent units of production for October

Particular	Direct material	Conversion
Equivalent units to complete beginning work in process:
Material (0% of 30,000)	0
Conversion (70% of 30,000)		21,000
Units started and completed	120,000	120,000
Equivalent units in ending work-in-process
Direct material (100% of 20,000)	20,000
Conversion (80% of 20,000)		16,000
Equivalent units of production	140,000	157,000

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Most popular questions from this chapter

Question: During May, the production department of a process manufacturing system completed a number of units of a product and transferred them to finished goods. Of these transferred units, 62,500 were in process in the production department at the beginning of May and 175,000 were started and completed in May. May’s beginning inventory units were 40% complete with respect to materials and 80% complete with respect to conversion. At the end of May, 76,250 additional units were in process in the production department and were 80% complete with respect to materials and 20% complete with respect to conversion. The production department had \(683,750 of direct materials and \)446,050 of conversion cost charged to it during May. Its beginning inventory included \(99,075 of direct materials cost and \)53,493 of conversion cost.

1.Compute the number of units transferred to finished goods.
2.Compute the number of equivalent units with respect to both materials used and conversion used in the production department for May using the FIFO method.
3.Compute the direct materials cost and the conversion cost per equivalent unit for the department.
4.Using the FIFO method, assign May’s costs to the units transferred to finished goods and assign costs to its ending work in process inventory

Belda Co. makes organic juice in two departments: cutting and blending. Direct materials are added at the beginning of each process, and conversion costs are added evenly throughout each process. The company uses the FIFO method of process costing. During March, the cutting department completed and transferred 220,000 units to the blending department. Of the units completed, 10,000 were from beginning inventory and the remaining 210,000 were started and completed during the month. Beginning work in process was 75% complete with respect to direct materials and 60% complete with respect to conversion. The company has 40,000 units (50% complete with respect to direct materials and 30% complete with respect to conversion) in process at month-end. Information on the cutting department’s costs of beginning work in process inventory and costs added during the month follows.

Cost	Direct Materials	Conversion
Of beginning work in process inventory	\( 16,800	\) 97,720
Added during the month	223,200	1,233,960

Required

Prepare the cutting department’s process cost summary for March using the FIFO method.
Prepare the journal entry dated March 31 to transfer the cost of completed units to the blending department.

Analysis Component

3. The company provides incentives to department managers by paying monthly bonuses based on their success in controlling costs per equivalent unit of production. Assume that the production department overestimates the percentage of completion for units in ending inventory with the result that its equivalent units of production for March are overstated. What impact does this error have on bonuses paid to the managers of the production department? What impact, if any, does this error have on these managers’ April bonuses?

Braun Company produces its product through a single processing department. Direct materials are added at the beginning of the process. Conversion costs are added to the product evenly throughout the process. The company uses monthly reporting periods for its weighted-average process costing. The Work in Process Inventory account had a balance of \(21,300 on November 1, which consisted of \)6,800 of direct materials and \(14,500 of conversion costs.

During the month, the company incurred the following costs:

Direct materials	\) 116,400
Conversion	1,067,000

During November, the company started 104,500 units and transferred 100,000 units to finished goods. At the end of the month, the work in process inventory consisted of 12,000 units that were 100% complete with respect to direct materials and 25% complete with respect to conversion.

Required

Prepare the company’s process cost summary for November using the weighted-average method.
Prepare the journal entry dated November 30 to transfer the cost of the completed units to finished goods inventory

Refer to the information in QS 16-10. Calculate the assembly department’s cost per equivalent unit of production for materials and for conversion for November. Use the weighted-average method.

Hotwax completed products costing $275,000 and transferred them to finished goods. Prepare its journal entry to record the transfer of units from production to finished goods inventory.

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