Question

2.

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)		110,000		$	426,800
Units started and costs incurred during December		550,000			2,572,400
Units completed and transferred to next department during December		410,000			?

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?

Answer 1

• Workings

Units Reconciliation
Units to account for:
Beginning WIP	110,000
Units started this period	550,000
Total Units to account for	660,000
Total Units accounted for:
Completed & Transferred out	410,000
Ending WIP	250,000
Total Units accounted for	660,000

• Requirement A1

EUP - FIFO Method	Units	% Conversion	EUP - Conversion
Units of ENDING WIP	250,000	60.0%	150,000
Units STARTED & COMPLETED	300,000	100%	300,000
Units of beginning WIP	110,000	20.00%	22,000
Equivalent Units of Production			472,000 ANSWER

• Requirement A2

COST per EUP		Conversion
Cost incurred this period		$              2,572,400.00
Total Costs	Costs	$              2,572,400.00
Equivalent units of production	EUP	472,000
Cost per EUP		$                          5.45 Answer

• Requirement A3

Costs of Ending WIP:	EUP	Cost per EUP	Total Cost
- Conversion	150,000	$                              5.45	$       817,500.00 ANSWER

• Requirement B

>Last period = $426800 / (110000 x 80% complete) = $ 4.85
>This period = $ 5.45