Question

Weatherly Lumber Company processes wood pulp for manufacturing various paper products. The company employs a process costing system for its manufacturing operations. All direct materials are added at the beginning of the process, and conversion costs are incurred uniformly throughout the process. This is the company’s production schedule for May:

		Percent Completed
	Tons of Pulp	Materials		Conversion
Work-in-Process Inventory, May 1	3,000	100	%	50	%
Started during May	14,000
Units to account for	17,000
Units from beginning Work-in-Process, which were completed and transferred out during May	3,000
Started and completed during May	8,400
Work-in-Process Inventory, May 31	5,600	100	%	50	%
Total units accounted for	17,000

The following cost data are available:

Work-in-Process Inventory, May 1
Direct materials	$	47,640
Conversion		116,202
Costs incurred during May
Direct materials		217,560
Conversion		255,270

Required:

1. Calculate the equivalent units of direct materials and conversion during May. Use the FIFO method.

2. Calculate the cost per equivalent unit for both direct materials and conversion during May. Use the FIFO method.

Answer 1

STEP 1
Reconciliation of Units
	Units	% already completed		% completed this period
		Material	Conversion cost	Material	Conversion cost
Beginning WIP	3,000	100%	50%	0%	50%
Units introduced	14,000
Total units to be accounted for	17,000
Completed and Transferred unit	11,400	0%	0%	100%	100%
Ending WIP	5,600	0%	0%	100%	50%

STEP 2
Statement of Equivalent Units
	Total Units	Materials		Conversion Cost
Units Transferred:		% completed this period	Equivalent Units	% completed this period	Equivalent Units
From WIP	3,000	0%	-	50%	1,500
From units started/Introduced	8,400	100%	8,400	100%	8,400
Total	11,400		8,400		9,900
	Total Units	Materials		Conversion Cost
Ending WIP		% completed this period	Equivalent Units	% completed this period	Equivalent Units
Total	5,600	100%	5,600	50%	2,800
Total EUP	17,000		14,000		12,700

STEP 3
Cost per Equivalent Units AND Cost to be accounted for
	Materials	Conversion Cost	TOTAL
Cost incurred in Current Period	$ 217,560.00	$    255,270.00	$      472,830.00
Total Equivalent Units	14,000	12,700
Cost per Equivalent Units	$ 15.54	$ 20.10
Cost of Beginning WIP	$     47,640.00	$    116,202.00	$      163,842.00
Total cost to be accounted for			$      636,672.00

Requirement 1

	Material	Conversion
Equivalent Units of Production	14,000	12,700

Requirement 2

	Material	Conversion
Cost per equivalent Unit	$ 15.54	$ 20.10