Concept explainers
a.
Determine the equivalent units of production for the month of July using weighted average method and select the best answer from the given option.
a.
Answer to Problem 51P
Option (2) the equivalent units of production for the month of July using weighted average method formaterials is 870,000 and for conversion costs 814,000.
Explanation of Solution
Weighted average cost method:
Weighted average cost method is the method to find out the equivalent units in the
Compute the equivalent units of production for the month of July using weighted average method:
Particulars | Materials | Conversion |
Units transferred out | 790,000 | 790,000 |
EU in ending inventory | ||
Materials | 80,000(1) | |
Conversion costs | 24,000(2) | |
EU produced this period | 870,000 | 814,000 |
Working note 1:
Compute the ending inventory of materials:
Working note 2:
Compute the ending inventory for conversion costs:
(1)
720,000 for materials and 744,000 for conversion costs is the incorrect option because the computed values of materials and conversion costs are 720,000 and 744,000 respectively
(2)
870,000 for materials and 814,000 for conversion costs is the correct option because these are the computed values of the same.
(3)
734,000 for materials and 720,000 for conversion costs is the incorrect option because the computed values of materials and conversion costs are 870,000 and 814,000 respectively.
(4)
795,000 for materials and 734,000 for conversion costs is the incorrect option because the computed values of materials and conversion costs are 870,000 and 814,000 respectively.
(5)
None of the above is the incorrect option because the computed values of materials and conversion costs are 870,000 and 814,000 respectively.
b.
Determine the equivalent units produced during November using weighted-average method and select the best answer from the given option
b.
Answer to Problem 51P
Option (2) the equivalent units produced during November using weighted-average method are 370,000 for prior department costs, 330,000 for materials and 356,000 for conversion costs.
Explanation of Solution
Weighted average cost method:
Weighted average cost method is the method to find out the equivalent units in the process costing. Under this method work done on all completed units taken as 100% whether these units are from beginning inventory or units introduced in the process. The work done on the ending inventory is calculated as per work done on it with respect to the completed units.
Compute the equivalent units produced during November using weighted-average method:
Particulars | Prior department costs | Materials | Conversion costs |
Units transferred out | 330,000(3) | 330,000 | 330,000 |
EU in ending inventory | |||
Prior department costs | 40,000 | ||
Materials | 0 | ||
Conversion costs | 26,000 (4) | ||
EU produced this period | 370,000 | 330,000 | 356,000 |
Working note 3:
Compute the units transferred out:
Working note 4:
Compute the ending inventory conversion costs:
Justification for correct and incorrect answer:
(1)
Prior department costs 370,000, materials 330,000 and 304,000 conversion costs equivalent units is the incorrect option as that are 370,000, 330,000 and 356,000 are the computed values of prior department costs, materials and conversion costs respectively.
(2)
Prior department costs 370,000, materials 330,000 and 356,000 conversion costs equivalent units is the correct option as that are the computed values of the same.
(3)
Prior department costs 370,000, materials 330,000 and 345,000 conversion costs equivalent units is the incorrect option as that are 370,000, 330,000 and 356,000 are the computed values of prior department costs, materials and conversion costs respectively.
(4)
Prior department costs 320,000, materials 330,000 and 345,000 conversion costs equivalent units is the incorrect option as that are 370,000, 330,000 and 356,000 are the computed values of prior department costs, materials and conversion costs respectively.
(5)
None of the above is the incorrect option as that are 370,000, 330,000 and 356,000 are the computed values of prior department costs, materials and conversion costs respectively.
c.
Determine the equivalent units for the conversion costs using FIFO method and select the best answer from the given option.
c.
Answer to Problem 51P
Option (4) the equivalent units for the conversion costs using FIFO method is 342,000.
Explanation of Solution
First in and first out (FIFO) method:
Under this method cost of units sold and units lying as ending inventory is ascertained on the first in and first out basis. It means units entered in the store first would be sold out first.
Compute the equivalent units for the conversion costs using FIFO method:
Particulars | Amount |
Beginning inventory | 14,000(5) |
Add: Started and completed | 300,000 (6) |
Add: Ending inventory | 28,000 (7) |
Total equivalent units done | 342,000 |
Working note 5:
Compute the beginning inventory to be accounted for:
Working note 6:
Compute the units started and completed:
Working note 7:
Compute the equivalent units in ending inventory:
Justification for correct and incorrect answer:
(1)
298,000 is the incorrect option as the value of computed conversion costs is 342,000
(2)
320,000 is the incorrect option as the value of computed conversion costs is 342,000
(3)
348,000 is the incorrect option as the value of computed conversion costs is 342,000
(4)
342,000 is the correct option as the value of computed conversion costs is 342,000
(5)
None of the above is the incorrect option as the value of computed conversion costs is 342,000
d.
Determine the equivalent units produced for the month of December using FIFO method and select the best answer from the given option.
d.
Answer to Problem 51P
Option (1) the equivalent units produced for the month of December using FIFO method are 172,000 for materials and 168,000 for conversion costs.
Explanation of Solution
First in and first out (FIFO) method:
Under this method cost of units sold and units lying as ending inventory is ascertained on the first in and first out basis. It means units entered in the store first would be sold out first.
Compute the equivalent units produced for the month of December using FIFO method:
Particulars | Materials | Costs |
Materials | 0(8) | |
Conversion costs | 12,000(9) | |
Started and completed | 140,000(10) | 140,000 |
Ending inventory | ||
Materials | 32,000(11) | |
Conversion costs | 16,000 (12) | |
Work done | 172,000 | 168,000 |
Working note 8:
Compute the beginning inventory for materials:
Working note 9:
Compute the beginning inventory for conversion costs:
Working note 10:
Compute the started and completed units during the period:
Working note 11:
Compute the ending inventory for materials:
Working note 12:
Compute the ending inventory for conversion costs:
Justification for correct and incorrect answer:
(1)
172,000 for materials and 168,000 for conversion costs is the correct option as those are the computed values of materials and conversion costs.
(2)
212,000 for materials and 204,000 for conversion costs is the incorrect option as the computed values of materials and conversion costs are 172,000 and 168,000 respectively.
(3)
212,000 for materials and 200,000 for conversion costs is the incorrect option as the computed values of materials and conversion costs are 172,000 and 168,000 respectively.
(4)
172,000 for materials and 172,000 for conversion costs is the incorrect option as the computed values of materials and conversion costs are 172,000 and 168,000 respectively.
(5)
None of the above is the incorrect option as the computed values of materials and conversion costs are 172,000 and 168,000 respectively.
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Chapter 8 Solutions
FUNDAMENTALS OF COST ACCOUNTING W/CONNE
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