Fleming, fleming, and Johnson, a local CPA firm, provide the following data for

Question

Fleming, fleming, and Johnson, a local CPA firm, provide the following data for individual returns processed for March (outputs is measured in number of returns):

Units, beginning work in process ---

Units started 6,000

Units completed 5,000

Units, ending in work in process (50% complete) 1,000

Total Production costs $5,500

1. Prepare a physical flow schedule

2. Prepare an equivalent units schedule. Explain why output is measured in equivalent units.

3. What if EWIP is 80 percent complete? How would this change affect the physical flow schedule? The equivalent units schedule?

Explanation / Answer

Hi,

Please find the answer as follows:

Part 1:

Physical Flow Schedule:

Units to Account for:

Units in Opening WIP = 0

Units Started = 6000

Total Units to Account for = 0 + 6000 = 6000

Units Accounted for:

Units Completed = 5000

Units in Ending WIP = 1000

Total Units Accounted For = 5000 + 1000 = 6000

Part 2:

Equivalent Units Schedule

Units Completed = 5000

Units in Ending WIP*% of Completion = 1000*.50 = 500

Equivalent Units = 5000 + 500 = 5500

It is important because the output for a particular period should take into consideration both the units fully completed as well as the work performed on partial units.

Part 3:

Changing the percentage of completion doesn't affect the physical work schedule.

Equivalent Units Schedule would however change as follows:

Units Completed = 5000

Units in Ending WIP*% of Completion = 1000*.80 = 800

Equivalent Units = 5000 + 800 = 5800

The number of equivalent units would increase to 5800 units as a result of change in percentage of completion.

Thanks.

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