Chapter 20, Problem 5E

1.

To determine

Compute the departments’ equivalent unit of production when all direct materials are added to products when processing begins.

Explanation of Solution

Equivalents units for production (EUP): Equivalents units are a measure of the work done during an accounting period. It includes the beginning and closing inventory of work in process and they also provide information relating to work on units that are completely processed during the period. The Equivalents units for production (EUP) under FIFO method is computed as follows:

$\begin{array}{l}\text{Equivalent units of }\\ \text{production}\left(\text{EUP}\right)\end{array}\}=\left[\begin{array}{l}\text{Number of}\\ \text{units completed }\\ \text{and transferred}\end{array}\right]+\left[\begin{array}{l}\text{Number of whole units}\\ \text{ started, completed }\\ \text{and transferred to next }\\ \text{department}\end{array}\right]+\left[\begin{array}{l}\text{Number of equivalent }\\ \text{units in ending }\\ \text{work-in process }\\ \text{inventory}\end{array}\right]$

Determine the equivalent unit of production when all direct materials are added to products when processing begins.

Given, the Beginning inventory is 100% complete with respect to materials and the ending inventory is 100% complete with respect to materials.

EUP for Materials	Units of Product
To complete Beginning work in process $\left(24,000\text{ EUP}\times 0\%\right)$	0
Units started and completed $\left(56,000\text{ EUP}\times 100\%\right)$	56,000
Ending work in process $\left(16,000\text{ EUP}\times 100\%\right)$	16,000
Total Equivalent Units of Production	72,000

Table (1)

2.

To determine

Compute the departments’ equivalent unit of production when beginning inventory is 40% complete and ending inventory is 75% with respect to materials and conversion costs.

Explanation of Solution

Equivalents units for production (EUP): Equivalents units are a measure of the work done during an accounting period. It includes the beginning and closing inventory of work in process and they also provide information relating to work on units that are completely processed during the period. The Equivalents units for production (EUP) under FIFO method is computed as follows:

$\begin{array}{l}\text{Equivalent units of }\\ \text{production}\left(\text{EUP}\right)\end{array}\}=\left[\begin{array}{l}\text{Number of}\\ \text{units completed }\\ \text{and transferred}\end{array}\right]+\left[\begin{array}{l}\text{Number of whole units}\\ \text{ started, completed }\\ \text{and transferred to next }\\ \text{department}\end{array}\right]+\left[\begin{array}{l}\text{Number of equivalent }\\ \text{units in ending }\\ \text{work-in process }\\ \text{inventory}\end{array}\right]$

Determine the equivalent unit of production when beginning inventory is 40% complete and ending inventory is 75% with respect to materials and conversion costs.

Given, the Beginning inventory is 40% complete with respect to materials and the ending inventory is 75% complete with respect to materials.

EUP for Materials	Units of Product
Beginning work in process $\left(24,000\text{ EUP}\times \left\{1-40\%\right\}\right)$	14,400
Units started and completed $\left(56,000\text{ EUP}\times 100\%\right)$	56,000
Ending work in process $\left(16,000\text{ EUP}\times 75\%\right)$	12,000
Total Equivalent Units of Production	82,400

Table (2)

Note: $\left(1-40\%\right)$ represents the percentage of beginning inventory incomplete with respect to material costs and conversion costs.

3.

To determine

Compute the departments’ equivalent unit of production when beginning inventory is 60% complete as to materials and 40% complete as to conversion costs and ending inventory is 30% complete as to materials and 60% complete as to conversion costs.

Explanation of Solution

Equivalents units for production (EUP): Equivalents units are a measure of the work done during an accounting period. It includes the beginning and closing inventory of work in process and they also provide information relating to work on units that are completely processed during the period. The Equivalents units for production (EUP) under FIFO method is computed as follows:

$\begin{array}{l}\text{Equivalent units of }\\ \text{production}\left(\text{EUP}\right)\end{array}\}=\left[\begin{array}{l}\text{Number of}\\ \text{units completed }\\ \text{and transferred}\end{array}\right]+\left[\begin{array}{l}\text{Number of whole units}\\ \text{ started, completed }\\ \text{and transferred to next }\\ \text{department}\end{array}\right]+\left[\begin{array}{l}\text{Number of equivalent }\\ \text{units in ending }\\ \text{work-in process }\\ \text{inventory}\end{array}\right]$

Determine the equivalent unit of production when beginning inventory is 60% complete as to materials and 40% complete as to conversion costs and ending inventory is 30% complete as to materials and 60% complete as to conversion costs.

Given, the Beginning inventory is 60% complete with respect to materials and the ending inventory is 30% complete with respect to materials.

EUP for Materials	Units of Product
Beginning work in process $\left(24,000\text{ EUP}\times \left\{1-60\%\right\}\right)$	9,600
Units started and completed $\left(56,000\text{ EUP}\times 100\%\right)$	56,000
Ending work in process $\left(16,000\text{ EUP}\times 30\%\right)$	4,800
Total Equivalent Units of Production	70,400

Table (3)

Note: $\left(1-60\%\right)$ represents the percentage of beginning inventory incomplete with respect to material costs and conversion costs.