Jones Company manufactures a single product and uses process costing (FIFO metho
ID: 467547 • Letter: J
Question
Jones Company manufactures a single product and uses process costing (FIFO method). The company's product goes through two processing departments, etching and wiring. The following activity was recorded in the etching department during July:
Production data:
Units in process, July (materials 60% complete; conversion 30% complete 50,000
Units started into production 500,000
Units in process, July (materials 80% complete; conversion 40% complete) 60,000
Cost data:
Work in process inventory, July 1
Materials cost $17,000
Conversion cost $3000
Cost added during July
Materials cost $457,200
Conversion cost $349,300
Materials are added at several stages during etching process. The company uses FIFO method
1) Compute the equivalent units of production
2) Compute the costs per equivalent unit for July
3) Determine the cost of ending work in process inventory and of the units transferred to the Wiring department
4) Prepare a cost reconciliation between the costs determined in 3) above and the cost of the beginning inventory and cost added during the period
Please show all work
Explanation / Answer
According to FIFO method Equivalent units of production is calculated by following formula:
Equivalent units of production
= Equivalent units to complete beginning work in process Inventory
+ Units started and completed during the period
+ Equivalent units in ending work in process inventory
Equivalent units to complete beginning work in process Inventory
= Units in beginning work in process inventory x (100% - % completion of beginning inventory)
Units started and completed during the period
= Unit started in production – Ending work in process inventory
Equivalent units in ending work in process inventory
= Units in ending work in process inventory x % completion of ending inventory)
Equivalent units of production for Etching Department during July
Materials
Conversion
Total complete beginning work in process (a)
Materials: 50,000 x (100% - 60% )
20000
Conversion: 50,000 x (100% - 30% )
35000
Units Started and completed during July (b)
(500,000 – 60,000)
440000
440000
Ending Inventory in Process: (c)
Materials: 60,000 x 80% complete
48000
Conversion: 60,000 x 40% complete
24000
Equivalent units of production (a +b +c)
508000
499000
Cost per equivalent unit = cost added during the period/equivalent units of production
Materials
Conversion
Cost added during July month (a)
$457,200
$349,300
Equivalent units of production (b)
508,000
499,000
Cost per equivalent units of production (a/b)
$0.9
$0.7
c.
Cost of Ending Work in Process Inventory for Etching Department during July
Materials
Conversion
Total
Ending Work in process inventory:
Equivalent units of production (a)
48,000
24,000
Cost per equivalent units of production (b)
$0.9
$0.7
Cost of ending work in process inventory (a x b)
$43,200
$16,800
$60,000
Cost of Units Transferred out form Etching Department during July
Materials
Conversion
Total
Units Transferred Out:
Cost in beginning work in process Inventory
$17,000
$3,000
$20,000
Cost to complete the units in beginning work in process
inventory
Equivalent units of production required to complete the
units in beginning inventory
20,000
35,000
Cost per equivalent units of production
$0.9
$0.7
Cost to complete the units in beginning work in process
inventory
$18,000
$24,500
$42,500
Cost to units started and completed in July
Units started and completed in July
440,000
440,000
Cost per equivalent units of production
$0.9
$0.7
Cost to units started and completed in July
$396,000
$308,000
$704,000
Total cost of units transferred out
$766,500
Reconciliation Statement:
Reconciliation Statement for Etching Department during July
Cost to be accounted for:
Cost in beginning work in process Inventory
$20,000
Costs added to production during the July ($457,200 + $349,300)
$806,500
Total Cost to be accounted for
$826,500
Costs accounted for as follows:
Cost in ending work in process Inventory
$60,000
Costs of units transferred out
$766,500
Total Cost accounted for
$826,500
Equivalent units of production for Etching Department during July
Materials
Conversion
Total complete beginning work in process (a)
Materials: 50,000 x (100% - 60% )
20000
Conversion: 50,000 x (100% - 30% )
35000
Units Started and completed during July (b)
(500,000 – 60,000)
440000
440000
Ending Inventory in Process: (c)
Materials: 60,000 x 80% complete
48000
Conversion: 60,000 x 40% complete
24000
Equivalent units of production (a +b +c)
508000
499000
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