Q31E - Horngren'S Financial And Managerial Accounting

Question

Brian’s Frozen Pizzas uses FIFO process costing. Selected production and cost data follow for April 2018.

	Prepping department
Units to account for:
Beginning work-in-process, March 31	20,000
Started in April	45,000
Total units to account for	65,000
Units accounted for:
Completed and transferred out during April:
From beginning work-in-process inventory	20,000
Started and completed during April	30,000
Ending work-in-process, April 30	15,000
Total units accounted for	65,000

Requirements

1. Calculate the following:

a. On March 31, the Prepping Department beginning Work-in-Process Inventory was 75% complete for materials and 55% complete for conversion costs. This means that for the beginning inventory % of the materials and % of the conversion costs were added during April.

b. On April 30, the Prepping Department ending Work-in-Process Inventory was 60% complete for materials and 85% complete for conversion costs. This means that for the ending inventory % of the materials and % of the conversion costs were added during April.

2. Use the information in the table and the information in Requirement 1 to compute the equivalent units of production for direct materials and conversion costs for the Prepping Department.

Step-by-Step Solution

Answer

1. a)The cost added during April for the beginning WIP inventory is 25% for direct material and 45% for conversion costs.

 b) The cost added during April for Ending WIP is 60% for direct material and   85% for conversion costs.

2. The equivalent unit of production for direct material is 44,000 units, and for conversion costs 51,750 units.

Step-by-Step Solution: Step 1: Work-in-process Inventory

The work-in-process inventory means the inventory which is not completed through the processing at the end of the reporting period. This inventory is required to be completed by further processing.

Step 2: For the opening WIP inventory, material and the conversion cost added during April

$$\begin{gathered} \mathbf{Direct}\mathbf{ }\mathbf{material}\mathbf{=}\mathbf{100}\mathbf{\%}\mathbf{-}\mathbf{Completion}\mathbf{\%}\mathbf{ }\mathbf{for}\mathbf{ }\mathbf{material} \\ \mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{=}\mathbf{100}\mathbf{\%}\mathbf{-}\mathbf{75}\mathbf{\%} \\ \mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{=}\mathbf{25}\mathbf{\%} \end{gathered}$$

$$\begin{gathered} \mathbf{Conversion}\mathbf{ }\mathbf{costs}\mathbf{=}\mathbf{100}\mathbf{\%}\mathbf{-}\mathbf{Completion}\mathbf{\%}\mathbf{ }\mathbf{fo}\mathbf{ }\mathbf{Conversion}\mathbf{ }\mathbf{costs} \\ \mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{=}\mathbf{100}\mathbf{\%}\mathbf{-}\mathbf{55}\mathbf{\%} \\ \mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{=}\mathbf{45}\mathbf{\%} \end{gathered}$$

Step 3: For the ending WIP inventory , material and the conversion cost added during April

$$\begin{gathered} \mathbf{Direct}\mathbf{ }\mathbf{material}\mathbf{=}\mathbf{Completion}\mathbf{\%}\mathbf{ }\mathbf{for}\mathbf{ }\mathbf{ }\mathbf{material} \\ \mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{=}\mathbf{60}\mathbf{\%} \end{gathered}$$

$$\begin{gathered} \mathbf{Conversion}\mathbf{ }\mathbf{costs}\mathbf{=}\mathbf{Completion}\mathbf{\%}\mathbf{ }\mathbf{for}\mathbf{ }\mathbf{Conversion}\mathbf{ }\mathbf{costs} \\ \mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{=}\mathbf{85}\mathbf{\%} \end{gathered}$$

Step 4: Equivalent unit of production for direct material

Particulars	No. of units
Beginning WIP (20,000 x 25%)	5,000
Started and completed units (30,000 x 100%)	30,000
In process units (15,000 x 60%)	9,000
Total EUP for direct materials	44,000

Step 5: Equivalent unit of production for conversion costs

Particulars	No. of units
Beginning WIP (20,000 x 45%)	9,000
Started and completed units (30,000 x 100%)	30,000
In process units (15,000 x 85%)	12,750
Total EUP for conversion costs	51,750