Question

Magic Company adds materials at the beginning of the process in Department A. The following information on physical units for Department A for the month of August is available:

Work in process, August 1 (57% complete with respect to conversion) 16,700
Started in August 121,700
Completed 121,700
Work in process, August 31 (72% complete with respect to conversion) 16,700
a. Compute the equivalent units for materials costs and for conversion costs using the weighted-average method.

b. Compute the equivalent units for materials costs and for conversion costs using the FIFO method.

Answer 1

Solution:

a) Calculation of Equivalent Units using weighted average method :-

Materials = Complete Unit + Work in Process Inventory

= 121,700+ 16,700

= 138,400 Units

Conversion Costs = Complete Units + 72% of ending Work in Process inventory

= 121,700+ 72% * 16,700

= 121,700+ 12,024

= 133,724 units

b) Calculation of Equivalent Units using FIFO Method.

Materials = Complete Units + ending work in process

= (16,700- 121,700) + 16,700

= 4530 + 16,700

= 21,230 units

Conversion Cost = Beginning Work in Process + Complete Units + Ending Work in Process

= (16,700*57%) + (121,700- 16,700) + (16,700*72%)

= 126,543 units