Question

Exercise 6-1
Computing Equivalent Units of Production

Using the data given for Cases 1–3 below, and assuming the use of the average cost method, compute the separate equivalent units of production—one for materials and one for labor and overhead—under each of the following assumptions (labor and factory overhead are applied evenly during the process in each assumption):

Assumptions:

All materials go into production at the beginning of the process.

All materials go into production at the end of the process. (Note that this would have to be a department subsequent to the first department for all materials to be added at the end of the process.)

At the beginning of the process, 75% of the materials go into production and 25% go into production when the process is one-half completed.

Note that you will have three solutions for each of the following cases:

Case 1	—	Started in process 5,000 units; finished 3,000 units; work in process, end of period, 2,000 units, three-fourths completed.
Case 2	—	Opening inventory 5,000 units, three-fifths completed; started in process 40,000 units; finished 39,000 units; work in process, end of period, 6,000 units, one-fourth completed.
Case 3	—	Opening inventory 1,000 units, one-half completed, and 8,000 units, one-fourth completed; started in process 30,000 units; finished 29,000 units; closing inventory work in process 5,000 units, one-fourth completed, and 5,000 units, one-half completed.

		Equivalent Units
		Case 1	Case 2	Case 3
a.	Materials account	_______	_______	_______
	Labor and factory overhead	_______	________	_______
b.	Materials account	_______	_________	________
	Labor and factory overhead	________	________	_______
c.	Materials account	_______	________	________
	Labor and factory overhead	_______	________	_______

Answer 1

1	All materials go into production at the beginning of the process.
					Equivalent Units
	Units		% work done	Direct Materials	% work done	Conversion Costs
	Beginning
	Started and completed	3,000	100%	3,000	100%	3,000
	Ending Inventory	2,000	100%	2,000	75%	1,500
	Total	5,000		5,000		4,500
2	All materials go into production at the end of the process
					Equivalent Units
	Units		% work done	Direct Materials	% work done	Conversion Costs
	Beginning	5,000	100%	5,000	60%	3,000
	Started and completed	34,000	100%	34,000	100%	34,000
	Ending Inventory	6,000	100%	6,000	25%	1,500
	Total	45,000		45,000		38,500
3	At the beginning of the process, 75% of the materials go into production and 25% go into production when the process is one-half completed
					Equivalent Units
	Units		% work done	Direct Materials	% work done	Conversion Costs
	Beginning
	Started and completed	29,000	100%	29,000	100%	29,000
	Ending Inventory	5,000	100%	5,000	1/4 x 75%	938
	Ending Inventory	5,000	100%	5,000	50%	2,500
	Total	39,000		39,000		32,438