EXERCISE 3-9. Calculation of Equivalent Units [LO 2] McMillian Tire Company prod

Question

EXERCISE 3-9. Calculation of Equivalent Units [LO 2] McMillian Tire Company produces tires used on small trailers. The month of June ended with 500 tires in process, 90 percent as to direct materials, and 50 percent complete as to conversion costs; 2,000 tires were transferred to finished goods during the month, and 2,400 were started during the month. The beginning Work in Process inventory was 60 percent complete as to direct materials and 40 percent complete as to conversion costs.

Determine the denominators to be used in the calculations of cost per equivalent unit for materials and conversion costs.

Explanation / Answer

Determine the denominators to be used in the calculations of cost per equivalent unit for materials and conversion costs. Material Conversion cost % Units % units Beginning stock 2,400 40 960 60 1440 Introduced during the month 100 100 100 100 100 Total 2,500 1060 1550 Less Ending stock 500 units 10 50 50 250 Net units produced 1010 1300 (To be used in the calculation of cost per equivalent unit)

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