Magic Company adds materials at the beginning of the process in Department A. Th

Question

Magic Company adds materials at the beginning of the process in Department A. The following information on physical units for Department A for the month of August is available:

Required:

a. Compute the equivalent units for materials costs and for conversion costs using the weighted-average method.

b. Compute the equivalent units for materials costs and for conversion costs using the FIFO method.

Work in process, August 1 (64% complete with respect to conversion) 17,700 Started in August 118,400 Completed 118,400 Work in process, August 31 (80% complete with respect to conversion) 17,700

Explanation / Answer

a). Calculation of Equivalent Units using weighted average method :-

Materials = Complete Unit + Work in Process Inventory

= 118400 + 17700

= 136100 Units

Conversion Costs = Complete Units + 80% of ending Work in Process inventory

= 118400 + 80% * 17700

= 118400 + 14160

= 132560 units

b). Calculation of Equivalent Units using FIFO Method.

Materials = Complete Units + ending work in process

= (118400 - 17700) + 17700

= 100700 + 17700

= 118400 units

Conversion Cost = Beginning Work in Process + Complete Units + Ending Work in Process

= (17700*36%) + (118400 - 17700) + (17700*80%)

= 6372 + 100700 + 14160

= 121232 units

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