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Chapter 18: Q13RQ (page 1006)

Most companies using a process costing systems have to calculate more than one EUP. Why? How many do they have to calculate?

Short Answer

Expert verified

The companies using the process costing system have to calculate more than one EUP. It is so because in the process costing there is more than one processing department, so the company is required to compute the EUP of each department. It is computed by multiplying the number of units in the process with the completion percentage.

Step by step solution

01

Equivalent Unit of Production

Equivalent unit of production is calculated by the companies to measure the direct materials, direct labor, and the manufacturing overhead incurred on the partially completed units during the year and to express them in terms of fully completed units of output.

02

Calculation of EUP

Equivalent unit of production is computed to measure the cost of direct material, direct labor, and manufacturing cost. If the company is using the process costing system, then the company is required to compute the EUP for eachprocessing department. It is computed as follows:

EUPforprocess1department=Numberofunits×Completion%

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Most popular questions from this chapter

Question: Department 4 has completed production on units that have a total cost of $15,000. The units are ready for sale. Give the journal entry.

Question: What is a production cost report?

Match the following terms to their definitions.

1. Direct labor plus manufacturing

Overhead

a. Expresses partially completed units in terms of fully completed units

2. Prepared by department for EUP, production costs, and assignment of costs

b. Used by companies that manufacture

homogenous products

3. Equivalent units of production

c. Previous costs brought into later

process

4. Process costing system

d. Conversion costs

5. Transferred in costs

e. Combines prior period costs with current period costs

6. Weighted-average method

f. Production cost report

Color Explosion prepares and packages paint products. Color Explosion has two departments: Blending and Packaging. Direct materials are added at the beginning of the blending process (dyes) and at the end of the packaging process (cans). Conversion costs are added evenly throughout each process. The company uses the weighted- average method. Data from the month of May for the Blending Department are as follows:

Gallons

Beginning work-in-process inventory

0 gallons

Started in production

8,500 gallon

Completed and transferred out to packaging in may

6,500 gallon

Ending work-in-process inventory (30% of the way through the blending process)

2,000 gallon

Costs

Beginning work-in-process inventory

\(0

Costs added during May:

  • Direct materials

5,525

  • Direct labor

1,500

  • Manufacturing overhead allocated

2,547

Total costs added during May

\)9,572

Requirements

1. Compute the Blending Department’s equivalent units of production for direct

materials and for conversion costs.

2. Compute the total costs of the units (gallons)

a. completed and transferred out to the Packaging Department.

b. in the Blending Department ending Work-in-Process Inventory.

Refer to the data and your answers from Exercise E18-23.

Requirements

1. Prepare the journal entries to record the assignment of direct materials and direct labor and the allocation of manufacturing overhead to the Fermenting Department. Assume labor costs are accrued and not yet paid. Also prepare the journal entry to record the cost of the gallons completed and transferred out to the Packaging Department.

2. Post the journal entries to the Work-in-Process Inventory—Fermenting T-account. What is the ending balance?

3. What is the average cost per gallon transferred out of the Fermenting Department into the Packaging Department? Why would Shea Winery’s managers want to know this cost?
See all solutions

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