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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Equivalent units of production: average cost method

The Converting Department of Tender Soft Tissue Company uses the average cost method and had 1,900 units in work in process that were 60% complete at the beginning of the period. During the period, 15,800 units were completed and transferred to the Packing Department. There were 1,200 units in process that were 30% complete at the end of the period.

a. Determine the number of whole units to be accounted for and to be assigned costs for the period.

b. Determine the number of equivalent units of production for the period.

(a)

To determine

Process costs

It is a method of cost accounting, which is used where the production is continuous, and the product needs various processes to complete. This method is used to ascertain the cost of the product at each process or stage of production.

Equivalents units for production

The activity of a processing department in terms of fully completed units is known as equivalent units. It includes the completed units of direct materials and conversion cost of beginning work in process, units completed and transferred out, and ending work in process.

To Determine: The number of whole units to be accounted of Company TST and units to be assigned costs of Company TST.

Explanation

Calculate the number of whole units to be accounted for of Company TST as shown below:

Total accounted for = Units transferred out +Ending work in process inventory=15,800units +1,200units=17,000

Total accounted for is calculated by adding units transferred out and ending work in process inventory. Therefore, total accounted for 17,000 units

(b)

To determine
The number of equivalent units for production for the period of Company TST.

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