   Chapter 20, Problem 20.27EX

Chapter
Section
Textbook Problem

Equivalent units of production and related costsThe charges to Work, in Process—Baking Department for a period as well as information concerning production are as follows. The Department uses the average cost method, and all direct materials are placed in process during production. Work in Process—Baking Department Bal., 900 units, 40% completed 2,466 To Finished Goods, 8,100 units ? Direct materials, 8,400 units 34,500     Direct labor 16,200     Factory overhead 8,574     Bal., 1,200 units, 60% completed ?     Determine the following:a. the number of whole units to be accounted for and to be assigned costsb. The number of equivalent units of productionc. The cost per equivalent unitd. The cost of units transferred to Finished Goodse. The cost of units in ending Work in Process

(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.

Cost per unit

Total unit cost is the cost incurred by the company to produce one unit of product. The unit cost is calculated by dividing the units produced with the total cost.

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

Explanation

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

Total accounted for = Units transferred out +Ending work in process inventory=8,100units +1,200units=9,300units

Total accounted for is calculated by adding units transferred out and ending work in process inventory. Therefore, total accounted for 9,300 units

(b)

To determine
The number of equivalent units for production.

(c)

To determine
The cost per equivalent unit.

(d)

To determine
The cost of units transferred to finished goods.

(e)

To determine
The cost of units in ending work in process.

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