Question

Consider the following data for November 2012 from Gray Manufacturing Company, which makes silk pennants and uses a process- costing system.  All direct materials are added at the beginning of the process, and conversion costs are added evenly during the process. Spoilage is detected upon inspection at the completion of the process.  Spoiled units are disposed of at zero net disposal value.  Gray Manufacturing Company uses the FIFO method.

Physical units                Direct               Conversion

  (Pennants)                  Materials                 Costs                        

Work in process, November 1[a]                           1000                             $1,423                $1,110

Started in November 2012                                 ?

Good units completed and transferred

Out during November 2012                               9,000

Normal Spoilage                                               100

Abnormal Spoilage                                            50

Work in process, November 30[b]                         2,000

Total costs added during November 2012                                              $12,180               $27,750

Compute Equivalent units for direct materials and conversion costs and assign total costs to units completed and transferred out, including normal spoilage and abnormal spoilage. (Do steps 1-5)

[a]Degree of completion: direct materials, 100%; conversion costs, 50%.

[b]Degree of completion: direct materials, 100%; conversion costs, 30%.

Answer 1

1. Calculate equivalent units for materials and conversion costs.
FIFO Method
Gray Manufacturing Company
Cost of Production Report
For the Month Ended November 2012
UNITS			Equivalent Units
	Physical Units	% complete	Materials	% complete	Conversion Costs
Units to be accounted for:
Work in process, November 1	1000
Started in November 2012 (11150-1000)	10150
Total units	11150
Units accounted for:
Good units Completed and Transferred out during November 2012
From beginning Work in process	1000	0%	0	50%	500
Started and Completed (9000-1000)	8000	100%	8000	100%	8000
Normal Spoilage	100	100%	100	100%	100
Abnormal Spoilage	50	100%	50	100%	50
Work in process, November 30	2000	100%	2000	30%	600
Equivalent units to be assigned costs	11150		10150		9250
2.. costs per equivalent unit.
COSTS	Costs
	Direct Materials	Conversion	Total
Unit Costs
Total Costs added during November 2012	$12,180	$27,750	$ 39,930
	÷	÷
Equivalent units	10150	9250
Cost per equivalent unit	$1.20	$3.00	$4.20
Assignment of Cost of units completed and Transferred out (incuding normal spoilage), to Abnormal spoilage and to units in Ending Work in proces inventory :-
							Equivalent units	Cost per equivalent unit		Total
Cost of Beginning Work in proces inventory (1423+1110)				2,533
Cost added into Beginning Work in proces inventory
Materials	0	1.20	0
Conversion Costs	500	3.00	1500	1,500
Cost of Complete beginning WIP (a)				4,033
Cost of units started and completed (b)	8000	$4.20		33,600
Cost of normal spoilage ( c)	100	$4.20		420
Cost of units completed Transferred out (incuding normal spoilage) (a+b+c)				38,053
Cost of Abnormal Spoilage	50	$4.20		210
Cost of Ending Work in proces inventory
Materials	2000	$1.20	$2,400
Conversion Costs	600	$3.00	$1,800	4,200
Total costs accounted for				42,463

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