Question

Sunspot Beverages, Ltd., of Fiji makes blended tropical fruit drinks in two stages. Fruit juices are extracted from fresh fruits and then blended in the Blending Department. The blended juices are then bottled and packed for shipping in the Bottling Department. All materials are added by the extraction department. The following information pertains to the operations of the Blending Department for June.

	UNITS	Percentages
Work in Process, beginning	20000	75 % complete
Started into production	180000
Work in process - ending	40000	25 % complete

	Materials	Conversion
Work in Process, beginning	$25200	$24800
Cost added during June	$334800	$238700

Assume that the company uses the FIFO method.

Required:

Determine the equivalent units for conversion cost in June for the Blending Department. Determine the cost per equivalent unit for material cost in June for the Blending Department. Determine the cost per equivalent unit for conversion cost in June for the Blending Department. Determine the cost of units transferred-out in June for the Blending Department. Determine the value of the ending work in process inventory in June for the Blending Department.

Answer 1

• All working forms part of the answer
• Requirement 1: Equivalent units

EUP - FIFO Method	Units	% Material	EUP Materials	% Conversion	EUP - Conversion
Units of ENDING WIP	40,000	100%	40,000	25%	10,000
Units STARTED & COMPLETED	140,000	100%	140,000	100%	140,000
Units of beginning WIP	20,000	0%	-	25%	5,000
Equivalent Units of Production			180,000		155,000 = Answer

• Requirement 2 and 3: Cost per equivalent units

COST per EUP			Material		Conversion
Cost incurred this period			$       334,800.00		$                  238,700.00
Total Costs		Costs	$       334,800.00	Costs	$                  238,700.00
Equivalent units of production		EUP	180,000	EUP	155,000
Cost per EUP			$             1.86 = Requirement 2 answer		$                        1.54 = Requirement 3 answer

• Requirement 4

Cost of units transferred out = $ 533,700

Cost Transferred out:	EUP	Cost per EUP	Total Cost
Cost of Beginning WIP			$          50,000.00
Cost to complete beginning WIP-
- Direct Materials	-	$                   1.86	$                         -
- Conversion	5,000	$                   1.54	$            7,700.00
Total cost to complete beginning WIP			$          57,700.00
Cost of Units started & completed this period:	EUP	Cost per EUP	Total Cost
- Direct Materials	140,000	$                   1.86	$       260,400.00
- Conversion	140,000	$                   1.54	$       215,600.00
Total costs started & Completed this period			$       476,000.00
Total cost of work finished this period				$      533,700.00

• Requirement 5

Value of ending WIP Inventory = $ 89,800

Costs of Ending WIP:	EUP	Cost per EUP	Total Cost
- Direct Materials	40,000	$                   1.86	$          74,400.00
- Conversion	10,000	$                   1.54	$          15,400.00
Total cost of ending WIP				$         89,800.00