Arizaga Corporation manufactures canoes in two departments, Fabrication and Wate

Question

Arizaga Corporation manufactures canoes in two departments, Fabrication and Waterproofing. In the Fabrication Department, fiberglass panels are attached to a canoe-shaped aluminum frame. The canoes are then transferred to the Waterproofing department to be coated with sealant. Arizaga uses a weighted-average process cost system to collect costs in both departments.
All materials in the Fabrication Department are added at the beginning of the production process. On July 1, the Fabrication Department had 320 canoes in process that were 20% complete with respect to conversion cost. On July 31, Fabrication had 540 canoes in process that were 30% complete with respect to conversion cost. During July, the Fabrication Department completed 6,700 canoes and transferred them to the Waterproofing Department.

What are the Fabrication Department's equivalent units related to conversion costs for July?

Explanation / Answer

Equivalent units of production= units transferred to next department+ equivalent units in ending work in process Inventory

=$6700+(30%×540)

=$6,862

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