Graham Petroleum produces oil. On May 1, it had no work-in-process inventory. It
ID: 2340736 • 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 $ 2,420 million $ 3,370 million Conversion costs (labor and overhead) 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 ending inventory as of May 31. (Do not round intermediate calculations. Enter your answers in millions. For example, enter"1" instead of "1,000,000".) Answer is complete but not entirely correct. Cost of oil shipped in the pipeline Work-in-process ending inventory $5,135million $ 655millionExplanation / Answer
Cost of oil shipped in the pipeline
$ 5,190
Million
Work-in-process ending inventory
$ 600
Million
Explanation:
Shipped
Work-in-process
Total
May 31 Production in million barrels
173
25
198
% completed
100 %
80 %
Equivalent units in million barrels
173
20
193
Material cost
$ 2,420 Million
Labor and overhead cost
$ 3,370 Million
Total cost
$ 5,790 Million
÷ Total equivalent barrels produced
193 Million
Cost per equivalent barrel
$ 30
Cost of oil shipped = equivalent units shipped x cost per equivalent units
= 173 Million x $ 30 = $ 5,190 Million
Cost of oil in ending work-in-process = work-in-process equivalent units x cost per equivalent
= 20 Million x $ 30 = $ 600 Million
Cost of oil shipped in the pipeline
$ 5,190
Million
Work-in-process ending inventory
$ 600
Million
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