   Chapter 20, Problem 20.5EX

Chapter
Section
Textbook Problem

Equivalent units of productionThe Converting Department of Soft Touch Towel and Tissue Company had 1,200 units in work in process at the beginning of the period, which were 25% complete. During the period, 16,000 units were completed and transferred to the Packing Department. There were 2,000 units in process at the end of the period, which were 40% complete. Direct materials are placed into the process at the beginning of production. Determine the number of equivalent units of production with respect to direct materials and conversion costs.

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 equivalents units of production for direct materials and conversion costs.

Explanation

Calculate equivalents units of production for direct materials and conversion costs as shown below:

Figure (1)

Working notes:

Calculate percentage completed units for beginning inventory of conversion costs as shown below:

CompletedPercentage units forbegining inventory conversion costs) = 1 25%=75%

Calculate transferred to packing department units as shown below:

Started and completed units =(Transferred to packing department units beginning inventory units)=16,000

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