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The following information is available from the Oils Division of Glasgow Corporation for December. Conversion costs...

The following information is available from the Oils Division of Glasgow Corporation for December. Conversion costs for this division were 80 percent complete as to beginning work-in-process inventory and 60 percent complete as to ending work-in-process inventory. Information about conversion costs follows.

	Units		Conversion Costs
WIP at December 1 (80% complete)		112,000	$	443,520
Units started and costs incurred during December		552,000		2,628,480
Units completed and transferred to next department during December		412,000		?

The Oils Division uses FIFO.

Required:

a-1. Compute the equivalent units for conversion costs.

a-2. Compute the cost per equivalent unit for conversion costs.

a-3. What was the conversion cost of work-in-process inventory in the Oils Division at December 31?

b. What were the conversion costs per equivalent unit produced last period and this period, respectively?

Solutions

Expert Solution

a-1) WIP at December31 = Opening WIP + Units Started during the period - Units Completed & transfered

= 112000 + 552000 - 412000

= 252000 Units (60% Completed)

Equivalent Units = Actual Number Units in the process * Percentage of work Completed

Statement of Equivalent units for conversion costs (under FIFO)

Particulars	Input Units	Particulars	Output units	% Completion	Equivalent Units
Opening WIP	112000	From Opening WIP	112000	80%	89600
Units Started	552000	From Started	300000	100%	300000
		Units Completed & Transferred to next department	412000
		Closing WIP	252000	60%	151200
	664000		664000		540800

a-2) Cost per Equivalent Units = Cost Incurred during December / Equivalent Units

= $ 2,628,480 / 540800 Units

= $ 4.86 approx.

a-3) Conversion cost of work-in-process inventory in the Oils Division at December 31

= Closing WIP Equivalent Units * Cost per Equivalent Units

= 151200 Units * $ 4.86

= $ 734,886

Cost of Units Completed and Tranferred to next Department = 412000 Units * Cost per Equivalent Unit @ $4.86

= $ 2,002,320

b) Conversion costs per equivalent unit produced last period

Particulars	Units	% Completion	Equivalent Units(EU)	Cost ($)	Cost per EU ($)
Opening WIP	112000	80%	89600	4,43,520	4.95

Conversion costs per equivalent unit produced this period(December)

= Cost Incurred during December / Equivalent Units

= $ 2,628,480 / 540800 Units

= $ 4.86 approx.

ekkarill92 answered 1 year ago

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