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Chapter 18: Q13RQ (page 1006)

Most companies using a process costing systems have to calculate more than one EUP. Why? How many do they have to calculate?

Short Answer

Expert verified

The companies using the process costing system have to calculate more than one EUP. It is so because in the process costing there is more than one processing department, so the company is required to compute the EUP of each department. It is computed by multiplying the number of units in the process with the completion percentage.

Step by step solution

01

Equivalent Unit of Production

Equivalent unit of production is calculated by the companies to measure the direct materials, direct labor, and the manufacturing overhead incurred on the partially completed units during the year and to express them in terms of fully completed units of output.

02

Calculation of EUP

Equivalent unit of production is computed to measure the cost of direct material, direct labor, and manufacturing cost. If the company is using the process costing system, then the company is required to compute the EUP for eachprocessing department. It is computed as follows:

EUPforprocess1department=Numberofunits脳Completion%

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Most popular questions from this chapter

Bert鈥檚 Exteriors produces exterior siding for homes. The Preparation Department begins with wood, which is chopped into small bits. At the end of the process, an adhesive is added. Then the wood/adhesive mixture goes on to the Compression Department, where the wood is compressed into sheets. Conversion costs are added evenly throughout the preparation process. January data for the Preparation Department are as follows:

UNITS

Beginning work-in-process inventory

0 sheets

Started in production

3,800 sheets

Completed and transferred out to compression in January

2,900 sheets

Ending work-in-process inventory (30% of the way through the preparation process)

900 sheets

COSTS

Beginning work-in-process inventory

$0

Costs added during January

Wood

2,888

Adhesive

1,914

Direct labor

987

Manufacturing overhead allocated

2,500

Total costs

8,289

Requirements

1. Prepare a production cost report for the Preparation Department for January. The company uses the weighted-average method. (Hint: Each direct material added at a different point in the production process requires its own equivalent units of production computation.)

2. Prepare the journal entry to record the cost of the sheets completed and transferred out to the Compression Department.

3. Post the journal entries to the Work-in-Process Inventory鈥擯reparation T-account. What is the ending balance?

Collins Company has the following data for the Assembly Department for August:

Unit in process at the beginning of august

900

Units started in august

2,000

Units completed and transferred

2,100

Units in process at the end of august

800

Conversion costs are added evenly throughout the process. The company uses the weighted-average method. Compute the equivalent units of production for direct materials and conversion costs for each independent scenario:

1. Units in process at the end of August are 20% complete; materials are added at the beginning of the process.

2. Units in process at the end of August are 80% complete; materials are added at the beginning of the process.

3. Units in process at the end of August are 20% complete; materials are added at the end of the process.

4. Units in process at the end of August are 80% complete; materials are added at the halfway point.

Question: The Finishing Department of Lee and Lewis, Inc., the last department in the manufacturing process, incurred production costs of \(220,000 during the month of June.If the June 1 balance in Work-in-Process Inventory鈥擣inishing is \)0 and the June 30balance is $70,000, what amount was transferred to Finished Goods Inventory?

Question: Refer to the data in Short Exercise S18-8 and your results for equivalent units of production. The Mixing Department of Complete Foods has direct materials costs of \(46,500 and conversion costs of \)23,540 for October.

Compute the cost per equivalent unit of production for direct materials and for

conversion costs.

The Finishing Department reports the following data for the month:

Equivalent unit of production:

Transferred in

3,000

Direct materials

3,000

Conversion cost

2,250

Costs:

Beginning WIP

Added this month

Total

Transferred in

\(7,500

\)15,000

\(22,500

Direct materials

3,250

6,500

9,750

Conversion costs

6,125

13,000

19,125

Total

\)16,875

\(34,500

\)51,375

Calculate the cost per equivalent units of production for each input. The company

uses the weighted-average method.
See all solutions

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