Question

Arboles Company manufactures pencils and has the following information available for the month of July: Work in process, May 1 (100% complete for July, 60% for conversion) 75,000 units $5,000 $17,500 Direct materials Number of units started 100,000 units July costs $ 6,500 $ 24,000 Direct materials Work in process, July 31 (100% complete for materials, 10% for conversion) 70,000 units Required Using the FIFO method of process costing, complete each of the following steps 1. Reconcile the number of physical units worked on during the period. Physical Units Beginning Units Units Started Total Units 75,000Units Completed 100,000Ending Units 175,000 Total Units Physical Units 105,000 70,000 175,000 2. Calculate the number of equivalent units. Equivalent Units Physical Units Direct Materials Beginning Inventory Started and Completed Ending Inventory Total Units 75,000 7,500 70,000 70,000 7,000 145,000 70,000 14,500

Answer 1

1		Physical units		Physical units
	Beginning units	75,000	Units completed (Bal. Fig)	1,05,000
	Units started	1,00,000	Ending units	70,000
	Total units	1,75,000	Total units	1,75,000
2			Equivalent units
		Physical units	Direct material	Conversion
	Units completed	1,05,000	1,05,000	1,05,000
	Ending Inventory	70,000	70,000	7,000
		1,75,000	1,75,000	1,12,000
	Workings:
			Equivalent units
		Physical units	Direct material	Conversion
	Units completed	1,05,000	100%	100%
	Ending Inventory	70,000	100%	10%
3		Direct material	Conversion
	Cost per equivalent unit	$                    0.06571	$                                   0.37054
	Workings:
		Direct material	Conversion	Total
	Work in process, July 1	$                        5,000	$                                     17,500	$           22,500
	July costs	$                        6,500	$                                     24,000	$           30,500
(a)	Total cost	$                      11,500	$                                     41,500	$           53,000
(b)	Equivalent units	1,75,000	1,12,000
(a) / (b)	Cost per equivalent unit	$                    0.06571	$                                   0.37054	$         0.43625
			Current Period Cost
4		Prior period cost	Direct material	Conversion	Total cost
	Beginning Inventory	$                      22,500	6,500	24,000	53,000
	Started and completed		6,900	38,906	45,806
	Ending Inventory		4,600	2,594	7,194
	Total cost accounted for	22,500	18,000	65,500	53,000
	Workings:
		Direct material	Conversion
	Started and completed	105000 X $0.06571	105000 X $0.37054
	Ending Inventory	70000 X $0.06571	7000 X $0.37054