St. Germaine Company manufactures car seats in its Chicago plant. Each car seat

Question

St. Germaine Company manufactures car seats in its Chicago plant. Each car seat passes through the assembly department and the testing department. This problem focuses on the assembly department.

REQUIREMENTS

1. For each cost category, compute equivalent units in the assembly department. Show physical units in the first column of your schedule.

2. What issues should the manager focus on when reviewing the equivalent-unit calculations?

3. For each cost category, summarize total assembly department costs for October 2017 and calculate the cost per equivalent unit.

4. Assign costs to units completed and transferred out and to units in ending work in process.

Physical Units Direct Conversion (Car Seats) Materials Costs 4,500 1,102,500 $475,875 Work in process, October 1 Started during October 2012 Completed during October 2012 Work in process, October 31 Total costs added during October 2012 "Degree of completion: direct materials, ?%; conversion costs, 60%. bDegree of completion: direct materials, ?96, conversion costs, 75%. 20,500 22,500 2,500 $3,997,500 $2,059,125

Explanation / Answer

1) Equivalent Unit :-

Beginning Inventory = 4500 units

Units Stated This Period = 20500 units

2) The issues that a manager should focus while reviewing the equivalent units calculation are

mentioned below :-

:- Causes of abnormally lost units.

:- To guard againt the possibility of Basis, managers should ask supervisors specific questions

about the process of estimating the degree of completion of ending inventory.

:- Top management should always emphasize obtaining the correct degree of completion,

regardless of how it affects reported perfomance. This emphasis drives ethical actions

throughout the organization.

3) Cost Per Equivalent Unit :-

4) Cost of Units Completed and transferred :-

= (22500*$204) + (22500*$104)

= $4590000 + $2340000

= $6930000

Cost of Ending Work in process :-

= (2500*$204) + (1875*$104)

= $510000 + $195000

= $705000

Particulars Physical Unit Direct Materials % Incurred during period Conversion Cost(Labor and Overhead) % incurred During Period Completed Units 22500 22500 100% 22500 100% Ending WIP 2500 2500 100% 1875 75% Total Equivalent Units 25000 25000 24375

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