Question

Moon Gazers, Inc., produces telescopes for use by high school students. All direct materials used in the production of telescopes are added at the beginning of the manufacturing process. Labor and overhead are added evenly thereafter, as each unit is assembled adjusted, and tested. Moon Gazers uses process costing and had the following unit production information available for the months of January and February Feb. 280 800 640 Jan. Number of units in beginning work in process inventory Number of units started during the month Total number of units transferred to finished goods 700 420 The units remaining in work in process at the end of January were approximately 60 percent complete. During the month of February all of the beginning work in process units were completed and the units remaining in work in process at the end of the month were approximately 80 percent complete a. For the month of January, calculate the equivalent units produced for each of the two cost categories-direct materials and labor and overhead b. For the month of February, calculate the equivalent units produced for each of the two cost categories-direct materials and labor and overhead Equivalent Units Produced January February a. Direct materials b. Labor and overhead

Explanations for each answers are greatly appreciated.

Answer 1

Answer

• COMPLETE ANSWER is at the END.
• NOTE: Method to be used [that is FIFO or Weighted Average] is not mentioned, hence I’m provided answers based on BOTH the METHODS.
• Requirement ‘a’ JANUARY

Equivalent units for January would be same under FIFO and Weighted Average BECAUSE there is no beginning Inventory

Answers:
‘a’ Direct material = 700 units
‘b’ Labor & Overhead = 588 units

EUP - FIFO Method	Units	% Material	EUP Materials	% Conversion	EUP - Conversion
Units of ENDING WIP	280	100%	280	60%	168
Units STARTED & COMPLETED	420	100%	420	100%	420
Equivalent Units of Production			700		588

• Requirement ‘b’ FEBRAURY

Answers:
‘a’ Direct material = 800 units [FIFO]
‘b’ Labor & Overhead = 824 units [FiFO]
OR
‘a’ Direct material = 1080 units [Weighted average]
‘b’ Labor & Overhead = 992 units [weighted average]

EUP - FIFO Method	Units	% Material	EUP Materials	% Conversion	EUP - Conversion
Units of ENDING WIP	440 [280 + 800 – 640]	100%	440	80%	352
Units STARTED & COMPLETED	360 [640 – 280]	100%	360	100%	360
Units of beginning WIP	280	0%	-	40.0%	112
Equivalent Units of Production			800		824

EUP - Weighted Average Method	Units	% Material	EUP Materials	% Conversion	EUP - Conversion
Units TRANSFERRED	640	100%	640	100%	640
Units of ENDING WIP	440	100%	440	80%	352
Equivalent Units of Production			1,080		992

• COMPLETE ANSWER

	January	February
Direct Materials	700	800 [FIFO] or 1080 [WA]
Labor & Overhead	588	824 [FIFO] or 992 [WA]