11. In the problems for this chapter, you will need to calculate the total numbe
ID: 2501926 • Letter: 1
Question
11. In the problems for this chapter, you will need to calculate the total number of equivalent units produced in a department. Smith Company completed and transferred 24,000 units in the mixing department, and ended the month with 4,000 units that were 80% completed. How many equivalent units did they produce? Answer: they get full credit (100%) for the units that were completed in the mixing department and then transferred out. This represents 100% times 24,000 units = 24,000 equivalent units. Note: the department ALSO gets credit for doing the work on the remaining 4,000 units that were not quite completed. The equivalent unit calculation for these unfinished units = 4,000 * 80% = 3200 equivalent units. Total equivalent units produced in the department = 24,000+3200=27,200. Calculate the equivalent units in cases a, b, and c below.
Completed & Transferred
Percent Done
+
Unfinished Units
Percent Done
Total Equiv. Units?
40,000 units
100%
+
12,000 units
40%
70,000 units
100%
+
14,000 units
70%
9,000
100%
+
3,000
30%
12. In Step 3, we calculate the cost per equivalent unit. In each problem you do, you will be given the costs incurred in the department. The costs will include direct material cost, direct labor costs and applied overhead costs, similar to what you learned in chapter 19. Suppose the direct material cost is $40,000, the direct labor cost is $60,000, and manufacturing overhead is applied at 100% of direct labor cost. Total equivalent units produced in the department is 20,000. What is the cost per equivalent unit? (Note: you can check your answers for DQ 12, 13, and 14 at the bottom of this page—the entire Cost of Production Report is revealed.)
13. Step 4: Determining the Cost of Units Transferred. Continuing the example from item 12 above, if 19,000 units were transferred to the next department, what was the cost of those units? Multiply the cost per unit from item 12 times 19,000.
14. Step 4 Continued: Calculate Cost of Units Remaining in Ending WIP. If the company ended the month with 2,000 units that were 50% complete, what is the cost of the units in ending work in process? Multiply 2,000 units times .50 times the cost per equivalent unit calculated in item 12.
15. Putting the Cost of Production Report Together. The solution for questions 12-14 is shown below, with each step noted. In the table, I made the assumption that the company started with 1,000 units in beginning WIP and started 20,000 units during the month.
Step 1 Unit Data
Whole Units
Equivalent Units
Beginning WIP
1,000
Units Received from Storeroom
+20,000
Units to Account For
21,000
Step 2 Equiv. Units
Units Completed and Transferred (100% complete)
19,000
19,000
Units in Ending WIP (50% complete)
+ 2,000
+ 1,000
Units Accounted For
21,000
20,000
Cost Data
Direct Material
$40,000
Direct Labor
$60,000
Factory Overhead
$60,000
Total Costs Incurred
$160,000
Step 3 Calculate Cost Per Equivalent Unit
$160,000/20,000
= $8.00/EU
Step 4 Calculate Cost of Units Transferred
19,000*$8.00
$152,000
Calculate Cost of Units in Ending WIP
2,000*.5*$8.00
$8,000
Total Costs Assigned
$160,000
Note that Units to Account For must equal Units Accounted For, and that Total Costs Incurred must equal Total Costs Assigned. Use a check markto verify equality.
Completed & Transferred
Percent Done
+
Unfinished Units
Percent Done
Total Equiv. Units?
40,000 units
100%
+
12,000 units
40%
70,000 units
100%
+
14,000 units
70%
9,000
100%
+
3,000
30%
Explanation / Answer
11. Equivalent units
cases a = (40000 * 100%) + (12000 * 40%) = 40,000 + 4,800 = 44,800 units
cases b = (70000 * 100%) + (14000 * 70%) = 70,000 + 9,800 = 79,800 units
cases c = (9000 * 100%) + (3000 * 30%) = 9000 + 900 = 9,900 units
12. The cost per equivalent unit
Direct Material = $40,000
Direct Labour = $60,000
Manufacturing Overhead = $60,000 (100% of the Direct Labour)
Total Cost = $160,000
Cost per Equivalent Units = Total Cost / Equivalent Units
= 160,000 / 20,000
= $8 per Unit
13. Cost of units transferred
= No. of Unit transferred * Cost per unit
= 19000 * 8
= $152,000
14. Cost of Units in Ending WIP
= no. of units * completion ratio * cost per unit
= 2000 * 50% * 8
= $8,000
15. Cost of Production Report
Cost of Units Transferred = $152,000
Cost of units in ending WIP = $ 8,000
Total Cost of Preoduction = $160,000
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.