Graham Petroleum produces oil. On May 1, it had no work-in-process inventory. It
ID: 2339884 • Letter: G
Question
Graham Petroleum produces oil. On May 1, it had no work-in-process inventory. It started production of 198 million barrels of oil in May and shipped 173 million barrels in the pipeline. The costs of the resources used by Graham in May consist of the following: Materials Conversion costs (labor and overhead) $ 2,420 million $3,370 million Required: The production supervisor estimates that the ending work in process is 80 percent complete on May 31. Compute the cost of oil shipped in the pipeline and the amount in work-in-process endingg inventory as of May 31. (Do not round intermediate calculations. Enter your answers in millions. For example, enter "1" instead of "1,000,000".) Cost of oil shipped in the pipeline Work-in-process ending inventory million millionExplanation / Answer
Units
Reconciliation of Units
A
Opening WIP
-
B
Introduced
198
C=A+B
TOTAL
198
D
Transferred
173
E=C-D
Closing WIP
25
Statement of Equivalent Units
Material
Conversion Cost
Units
Complete %
Equivalent units
Complete %
Equivalent units
Transferred
173
100%
173
100%
173
Closing WIP
25
100%
25
80%
20
Total
198
Total
198
Total
193
Cost per Equivalent Units ($ in Millions)
COST
Material
Conversion Cost
TOTAL
Cost incurred during period
$ 2,420.00
$ 3,370.00
$ 5,790.00
Total Cost to be accounted for
$ 2,420.00
$ 3,370.00
$ 5,790.00
Total Equivalent Units
198
193
Cost per Equivalent Units
$ 12.22222
$ 17.46114
Statement of cost($ in Million)
Cost
Equivalent Cost/unit
Ending WIP
Transferred
Units
Cost Allocated
Units
Cost Allocated
Material
$ 12.22222
25
$ 305.56
173
$ 2,114
Conversion Cost
$ 17.46114
20
$ 349.22
173
$ 3,021
TOTAL
$ 5,790
TOTAL
$ 655
TOTAL
$ 5,135
Answer
Cost of oil Shipped in the pipeline
$ 5,135
Millions
Work-in-process ending Inventory
$ 655
Millions
Units
Reconciliation of Units
A
Opening WIP
-
B
Introduced
198
C=A+B
TOTAL
198
D
Transferred
173
E=C-D
Closing WIP
25
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