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24 July, 09:16

The Converting Department of Osaka Napkin Company uses the average cost method and had 2,000 units in work in process that were 60% complete at the beginning of the period. During the period, 25,200 units were completed and transferred to the Packing Department. There were 1,100 units in process that were 30% complete at the end of the period.

a. Determine the number of whole units to be accounted for and to be assigned costs for the period.

b. Determine the number of equivalent units of production for the period.

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  1. 24 July, 10:06
    0
    Equivalent Units

    Material cost = 26,560

    Conversion Cost = 25,540

    Explanation:

    We would assume the company uses weighted average method of valuation.

    Under the weighted average method of valuation, to account for completed units, it is assumed that the entire degree of work required is done in the period under consideration. So there is no separation of the completed units into opening inventory and fully worked.

    Equivalent units = Degree of completion (%) * Number of units

    Material cost

    Item Unit Equivalent unit

    Completed 25,200 100% * 25200 = 25,200

    Closing WIP 1,360 100% * 1,360 1360

    Total equivalent units 26,560

    Conversion Cost

    Item Unit Equivalent unit

    Completed 25,200 100% * 25200 = 25,200

    Closing WIP 1,360 25% * 1,360 340

    Total equivalent units
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