In: Accounting
Graham Petroleum produces oil. On May 1, it had no work-in-process inventory. It started production of 211 million barrels of oil in May and shipped 176 million barrels in the pipeline. The costs of the resources used by Graham in May consist of the following:
Materials | $ | 2,827 | million | ||||
Conversion costs (labor and overhead) | $ | 3,280 | million | ||||
Required:
The production supervisor estimates that the ending work in process is 60 percent complete on May 31. Compute the cost of oil shipped in the pipeline and the amount in work-in-process ending inventory as of May 31. (Do not round intermediate calculations. Enter your answers in millions. For example, enter "1" instead of "1,000,000".)
a. | Production Started | 211 | million | barrels | ||||||||||
Completed | 176 | million | barrels | |||||||||||
Ending Work in process | 35 | million | barrels | |||||||||||
b. | Equivalent Units of Production | = | 176 | Million | + | 35 Million * 60% | = | 197 | ||||||
c. | Cost per equivalent units: | |||||||||||||
Materials | $ 2,827 | Million | ||||||||||||
Conversion Costs | $ 3,280 | Million | ||||||||||||
Total Costs | $ 6,107 | Million | ||||||||||||
÷ Equivalent units | 197 | Million | ||||||||||||
Cost per equivalent unit | $ 31.00 | |||||||||||||
Equivalent Units | Cost per unit | Total Cost | ||||||||||||
d. | Costs of units completed | = | 176 | $ 31.00 | $ 5,456 | |||||||||
Costs of Ending work in process | = | 21 | $ 31.00 | $ 651 | ||||||||||
Thus, | ||||||||||||||
Cost of oil shipped in the pipeline | $ 5,456 | million | ||||||||||||
Amount in work-in-process ending inventory as of May 31 | $ 651 | million | ||||||||||||