Chemtrex is an agricultural chemical producer. Process costing is used in its mixing department. At the...

Chemtrex is an agricultural chemical producer. Process costing is used in its mixing department. At the beginning of July, Chemtrex had 700,000 gallons 70 percent complete in work-in-process. During July, it started another 4,000,000 gallons and produced 3,700,000 gallons. One million gallons of ending work-in-process were 60 percent complete at the end of July. Conversion costs are incurred uniformly over the mixing process. In July, conversion costs were $4,300,000 and material costs were $9,400,000. Material is added at the beginning of the process.

Required:

a. Calculate the number of equivalent units of conversion work performed during July.

b. Cost per equivalent unit.

c. Cost of ending inventory and finished goods.

Solutions

Expert Solution

Using FIFO method ,Units that are started first are completed and transferred out.

so ,of the units produced .700000 gallons are from beginning inventory and remaining is from current period :3700000-700000=3000000

	Material	conversion
Beginning inventory		700000(1-.70)=210000
started and completed	3000000	3000000
ending work in process	1000000	1000000*60%= 600000
Equivalent unit of production	4000000	3810000

	Material	conversion
Cost incurred during the current period (A)	9400000	4300000
Equivalent unit of production (B)	4000000	3810000
cost per equivaent unit (A/B)	2.35	1.12861

	Material	conversion	Total
Finished goods inventory
beginning	0	210000*1.12861= 237008	237008
started and completed	3000000*2.35= 7050000	3000000*1.12861= 3385830	10435830
cost of finished goods inventory			10672838
Ending inventory	1000000*2.35= 2350000	600000*1.12861= 677166	3027166

#Difference is due to rounding off cost per equivalent unit for conversion cost.

ekkarill92 answered 1 year ago

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