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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 materials cost

The Rolling Department of Keystone Steel Company had 400 tons in beginning work in process inventor (20% complete). During the period, 7,900 tons were completed. The ending work in process inventory was 1,000 tons (30% complete). What are the total equivalent units for direct materials if materials are added at the beginning of the process?

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 calculate: The equivalents units for direct materials, if the materials are added at the beginning of the process of Company KS.

Explanation

Calculate the equivalents units for direct materials, if the materials are added at the beginning of the process of Company KS as shown below:

EQUIVALENT UNITS FOR DIRECT MATERIALS
Particulars Whole Units (A) Percent Materials Added in Period (B) Equivalent Units for Materials (A × B)
Inventory in process, beginning 400 0%  0
Add: Started and completed during July (1) 7,500 100%  7,500
Transferred out of Rolling (Completed)  7,900  7,500
Add: Inventory in process, Ending  1,000 100%  1,000
Total units to be assigned costs  8,900  8,500

Table (1)

Working note:

Calculate units started and completed during the month of July as shown below:

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