Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher

Exercise 37

Compute Equivalent Units

Select the best answer for each of the following independent multiple-choice questions.

a. Adams Company’s production cycle starts in Department A. The following information is available for July:

	Units
Work in process, July 1 (60% complete)	150,000
Started in July	720,000
Work in process, July 31 (30% complete)	80,000

Materials are added at the beginning of the process in Department A. Using the weighted- average method, what are the equivalent units of production for the month of July?

	Materials	Conversion
(1)	720,000	744,000
(2)	870,000	814,000
(3)	734,000	720,000
(4)	795,000	734,000
(5)	None of the above

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b. Department B is the second stage of Boswell Corporation’s production cycle. On November 1, beginning work in process contained 50,000 units, which were 30 percent complete as to conversion costs. During November, 320,000 units were transferred in from the first stage of the production cycle. On November 30, ending work in process contained 40,000 units, which were 65 percent complete as to conversion costs. Materials are added at the end of the process. Using the weighted-average method, the equivalent units produced during November were as follows:

	Prior
	Department Costs	Materials	Conversion
(1)	370,000	330,000	304,000
(2)	370,000	330,000	356,000
(3)	370,000	330,000	345,000
(4)	320,000	330,000	356,000
	None of the above

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c. Department C is the first stage of Cohen Corporation’s production cycle. The following equivalent unit information is available for conversion costs for the month of September:

Beginning work-in-process inventory (30% complete)	20,000
Started in September	340,000
Completed in September and transferred to Department D	320,000
Ending work-in-process inventory (70% complete)	40,000

Using the FIFO method, the equivalent units for the conversion cost calculation are:

(1)	342,000
(2)	298,000
(3)	348,000
(4)	320,000
(5)	None of the above.

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d. Draper Corporation computed the physical flow of units for Department D for the month of December as follows:

Units completed
From work in process on December 1	40,000
From December production	140,000
Total	180,000

Materials are added at the beginning of the process. Units of WIP at December 31 were 32,000. As to conversion costs, WIP at December 1 was 70 percent complete and WIP at December 31 was 50 percent complete. What are the equivalent units produced for the month of December using the FIFO method?

	Materials	Conversion
(1)	172,000	172,000
(2)	212,000	200,000
(3)	212,000	204,000
(4)	172,000	168,000
(5)	None of the above

Step 1 of 4

a. The answer is (2).

	Materials			Conversion Costs
Units transferred out?	790,000	a		790,000	a
EU in ending inventory:
?Materials 100% x 80,000 units?	80,000		EU
?Conversion costs 30% x 80,000 units?				24,000		EU
EU produced this period?	870,000		EU	814,000		EU

aUnits transferred out	=	units started + beg. inventory – ending inventory
	=	720,000 + 150,000 – 80,000
	=	790,000