Question

1. Equivalent Units of Production

The following information concerns production in the Baking Department for March. All direct materials are placed in process at the beginning of production.

ACCOUNT Work in Process—Baking Department							ACCOUNT NO.
Date		Item	Debit		Credit		Balance
							Debit		Credit
March	1	Bal., 8,100 units, 3/5 completed					21,060
	31	Direct materials, 145,800 units	189,540				210,600
	31	Direct labor	56,260				266,860
	31	Factory overhead	31,652				298,512
	31	Goods finished, 147,600 units			288,054		10,458
	31	Bal. ? units, 3/5 completed					10,458

a. Determine the number of units in work in process inventory at March 31.
units

b. Determine the equivalent units of production for direct materials and conversion costs in March. If an amount is zero, enter in "0".

Baking Department
Equivalent Units of Production for Direct Materials and Conversion Costs
For March
	Whole Units	Direct Materials Equivalent Units	Conversion Equivalent Units
Inventory in process, March 1
Started and completed in March
Transferred to finished goods in March
Inventory in process, March 31
Total

2. Costs per Equivalent Unit

Georgia Products Inc. completed and transferred 154,000 particle board units of production from the Pressing Department. There was no beginning inventory in process in the department. The ending in-process inventory was 13,000 units, which were 1/4 complete as to conversion cost. All materials are added at the beginning of the process. Direct materials cost incurred was $450,900, direct labor cost incurred was $203,800, and factory overhead applied was $47,800.

Determine the following for the Pressing Department. Round "cost per equivalent unit" answers to the nearest cent.

a. Total conversion cost	$
b. Conversion cost per equivalent unit	$
c. Direct materials cost per equivalent unit	$

3. Cost of Units Completed and in Process

The charges to Work in Process—Assembly Department for a period, together with information concerning production, are as follows. All direct materials are placed in process at the beginning of production.

Work in Process—Assembly Department
Bal., 8,000 units, 45% completed	19,920	To Finished Goods, 184,000 units	?
Direct materials, 188,000 units @ $1.5	282,000
Direct labor	327,300
Factory overhead	127,260
Bal. ? units, 75% completed	?

a. Based on the above data, determine the different costs listed below.

If required, round your interim calculations to two decimal places.

1. Cost of beginning work in process inventory completed this period.	$
2. Cost of units transferred to finished goods during the period.	$
3. Cost of ending work in process inventory.	$
4. Cost per unit of the completed beginning work in process inventory, rounded to the nearest cent.	$

b. Did the production costs change from the preceding period?

c. Assuming that the direct materials cost per unit did not change from the preceding period, did the conversion costs per equivalent unit increase, decrease, or remain the same for the current period?

4. Process Costing for a Service Company

Madison Electric Company uses a fossil fuel (coal) plant for generating electricity. The facility can generate 900 megawatts (million watts) per hour. The plant operates 600 hours during March. Electricity is used as it is generated; thus, there are no inventories at the beginning or end of the period. The March conversion and fuel costs are as follows:

Conversion costs	$40,500,000
Fuel	10,800,000
Total	$51,300,000

Madison also has a wind farm that can generate 100 megawatts per hour. The wind farm receives sufficient wind to run 300 hours for March. The March conversion costs for the wind farm (mostly depreciation) are as follows:

Conversion costs

$2,700,000

a. Determine the cost per megawatt hour (MWh) for the fossil fuel plant and the wind farm to identify the lowest cost facility in March.

	Cost Per Mega-watt Hour
Fossil plant		$	per MWh
Wind farm

b. Why are equivalent units of production not needed in determining the cost per megawatt hour (MWh) for generating electricity?

c. What advantage does the fossil fuel plant have over the wind farm? Which of the following is true.

1. Fossil fuel is easily available.
2. Fossil fuel plant has a cost advantage over wind farm.
3. The wind farm is subject to the presence of wind and thus, not reliable.
4. The fossil fuel plant can be turned on and off on a schedule, while the wind farm is subject to the varieties of nature.

Answer 1

1. Equivalent units of production:

a. Units in work in process inventory at March 31:

Units in work in process inventory at March 1	8,100
Units started During March	145,800
Total	153,900
Units completed	147,600
Units in work in process inventory at March 31	6,300

b.

Baking Department Equivalent Unit of Production for Direct Material and Conversion Cost For March
	Whole Units	Direct Material Equivalent Units	Conversion Equivalent Units
Inventory in process, March 1	8,100	0	3,240 (8,100*2/5)
Started and completed in March	139,500 (147,600-8,100)	139,500	139,500
Transferred to finished goods in March	147,600
Inventory in process, March 31	6,300	6,300	3,780 (6,300*3/5)
Total	153,900	145,800	146,520

2. Cost per equivalent units:

	Direct Material	Conversion
Cost added during March	$189,540	$87,912
Equivalent units	145,800	146,520
Cost per equivalent units	$1.3	$0.6