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Chapter 18: Q.18-8SE (page 1008)

Question: The Mixing Department of Complete Foods had 62,000 units to account for in October. Of the 62,000 units, 38,000 units were completed and transferred to the next department, and 24,000 units were 20% complete. All of the materials are added at the beginning of the process. Conversion costs are added evenly throughout the mixing process and the company uses the weighted-average method.

Compute the total equivalent units of production for direct materials and

conversion costs for October.

Short Answer

Expert verified

Answer

Particulars

Physical Units

Direct materials

Conversion cost

Units accounted for

Completed and transferred out

38,000

38,000

38,000

Ending WIP

24,000

24,000

4,800

Total units accounted for

62,000

62,000

42,800

Step by step solution

01

Equivalent unit of production for direct material

Particulars

Units

Completion %

EUP

Completed units

38,000

100%

38,000

In process units

24,000

100%

24,000

Total equivalent unit of production for direct material

62,000

02

Equivalent unit of production for conversion cost

Particulars

Units

Completion %

EUP

Completed units

38,000

100%

38,000

In process units

24,000

20%

4,800

Total equivalent unit of production for conversion cost42,800

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Most popular questions from this chapter

Question: What types of companies use job order costing systems?

Question: Explain the terms to account for and accounted for.

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

Rick Pines and Joe Lopez are the plant managers for High Mountain Lumber’s particle board division. High Mountain Lumber has adopted a just-in-time management philosophy. Each plant combines wood chips with chemical adhesives to produce particle board to order, and all product is sold as soon as it is completed. Laura Green is High Mountain Lumber’s regional controller. All of High Mountain Lumber’s plants and divisions send Green their production and cost information. While reviewing the numbers of the two particle board plants, she is surprised to find that both plants estimate their ending Work-in-Process Inventories at 75% complete, which is higher than usual. Green calls Lopez, whom she has known for some time. He admits that to ensure their division would meet its profit goal and that both he and Pines would make their bonus (which is based on division profit), they agreed to inflate the percentage completion. Lopez explains, “Determining the percent complete always requires judgment.

Whatever the percent complete, we’ll finish the Work-in-Process Inventory first thing next year.”

Requirements

  1. How would inflating the percentage completion of ending Work-in-Process Inventory help Pines and Lopez get their bonus?
  2. The particle board division is the largest of High Mountain Lumber’s divisions. If Green does not correct the percentage completion of this year’s ending Work-in-Process Inventory, how will the misstatement affect High Mountain Lumber’s financial statements?
  3. Evaluate Lopez’s justification, including the effect, if any, on next year’s financial statements.
  4. Address the following: What is the ethical issue? What are the options? What are the potential consequences? What should Green do?

Question: Mayhem Electronics makes game consoles in three processes: assembly, programming, and packaging. Direct materials are added at the beginning of the assembly process. Conversion costs are incurred evenly throughout the process. The Assembly Department had no Work-in-Process Inventory on March 31. In mid-April, Mayhem Electronics started production on 99,000 game consoles. Of this number, 95,000 game consoles were assembled during April and transferred out to the Programming Department. The April 30 Work-in-Process Inventory in the Assembly Department was 45% of the way through the assembly process. Direct materials costing \(301,950 were placed in production in Assembly during April, direct labor of \)100,960 was assigned, and manufacturing overhead of $136,200 was allocated to that department.

Requirements

1. Prepare a production cost report for the Assembly Department for April. The

company uses the weighted-average method.

2. Prepare a T-account for Work-in-Process Inventory—Assembly to show its activity during April, including the April 30 balance.
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