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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

Units of production data for the two departments of Atlantic Cable and Wire Company for July of the current fiscal year are as follows:

  Drawing Department Winding Department
Work in process, July 1 500 units, 50% completed 350 units. 30% completed
Completed and transferred to next processing department during July 11,400 units 10,950 units
Work in process, July 31 700 units, 55% completed 800 units, 25% completed

Each department uses the average cost method.

a. Determine the number of whole units to be accounted for and to be assigned costs and the equivalent units of production for the Drawing Department.

b. Determine the number of whole units to be accounted for and to be assigned costs and the equivalent units of production for the Winding Department.

(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 for drawing department.

Explanation

Calculate the number of whole units to be accounted for drawing department as shown below:

Total accounted for = Units transferred out +Ending work in process inventory=11,400units +700units=12,100units

Total accounted for is calculated by adding units transferred out and ending work in process inventory. Therefore, total accounted for 12,100 units.

Calculate the units to be assigned costs for drawing department as shown below:

Assigned costs = Units transferred out +Ending work in process inventory=11,400unitsx

(b)

To determine

  • The number of whole units to be accounted for winding department.
  • The units to be assigned costs for winding department.
  • The number of equivalent units for production for the period of winding department.

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