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Taco Ranch uses a process cost system and the FIFO cost flow assumption. Product

ID: 2416697 • Letter: T

Question

Taco Ranch uses a process cost system and the FIFO cost flow assumption. Production begins in the Crafting Department where materials are added at the beginning of the process and conversion costs are incurred uniformly throughout the process. On November 1, the beginning work in process inventory consisted of 10,000 units, which were 60% complete and had a cost of $266,000, $140,000 of which were materials costs. During November, the following occurred: Materials added $315,000 Conversion costs incurred $67,500 Units completed and transferred out in November 55,000 Units in ending work in process November 30 (20% complete) 25,000 Answer the following questions. What are the equivalent units of production for materials and conversion costs in the Crafting Department for the month of November? Materials Conversion Costs Total equivalent units What are the costs assigned to the ending work in process inventory on November 30? Costs assigned to the ending WIP What are the costs assigned to units completed and transferred out during November? Total costs transferred out

Explanation / Answer

1

Calculation of Equivalent units of Production:

(Using FIFO Method)

Equivalent Units

Physical Units

Materials

Conversion Cpsts

Units in beginning WIP

10000

0

4000

(10000*0%)

(10000*40%)

Units Started and Completed (55000-10000)

45000

45000

45000

(45000*100%)

(45000*100%)

Units in ending WIP

25000

25000

5000

(25000*100%)

(25000*20%)

Total Equivalent Units

70000

54000

2

Calculation of Cost Assigned to Ending WIP Inventory on November 30:

Total

Materials

Conversion Cpsts

Cost Added during the period (A)

$         315,000

$                   67,500

Total Equivalent Units (B)

70000

54000

Cost per Equivalent Unit = A/B = C

$                4.50

$                       1.25

Ending WIP units (D)

25000

5000

Cost Assigned to Ending WIP Inventory = C*D

$          118,750

$         112,500

$                     6,250

3

Calculation of Cost Assigned to Units completed and transferred out during November:

Total

Materials

Conversion Cpsts

Cost of beginning WIP (A)

$          266,000

$         140,000

$                126,000

Cost to complete beginning inventory:

Equivalent Units in beginning inventory

0

4000

Cost per Equivalent Unit

$                4.50

$                       1.25

Cost to complete beginning inventory (B)

$              5,000

$                     -  

$               5,000.00

Equivalent Units started and completed

45000

45000

Cost per Equivalent Unit

$                4.50

$                       1.25

Cost of units started and completed ©

$          258,750

$   202,500.00

$             56,250.00

Cost Assigned to Units completed and transferred out (A+B+C)

$    529,750.00

$   342,500.00

$          187,250.00

1

Calculation of Equivalent units of Production:

(Using FIFO Method)

Equivalent Units

Physical Units

Materials

Conversion Cpsts

Units in beginning WIP

10000

0

4000

(10000*0%)

(10000*40%)

Units Started and Completed (55000-10000)

45000

45000

45000

(45000*100%)

(45000*100%)

Units in ending WIP

25000

25000

5000

(25000*100%)

(25000*20%)

Total Equivalent Units

70000

54000

2

Calculation of Cost Assigned to Ending WIP Inventory on November 30:

Total

Materials

Conversion Cpsts

Cost Added during the period (A)

$         315,000

$                   67,500

Total Equivalent Units (B)

70000

54000

Cost per Equivalent Unit = A/B = C

$                4.50

$                       1.25

Ending WIP units (D)

25000

5000

Cost Assigned to Ending WIP Inventory = C*D

$          118,750

$         112,500

$                     6,250

3

Calculation of Cost Assigned to Units completed and transferred out during November:

Total

Materials

Conversion Cpsts

Cost of beginning WIP (A)

$          266,000

$         140,000

$                126,000

Cost to complete beginning inventory:

Equivalent Units in beginning inventory

0

4000

Cost per Equivalent Unit

$                4.50

$                       1.25

Cost to complete beginning inventory (B)

$              5,000

$                     -  

$               5,000.00

Equivalent Units started and completed

45000

45000

Cost per Equivalent Unit

$                4.50

$                       1.25

Cost of units started and completed ©

$          258,750

$   202,500.00

$             56,250.00

Cost Assigned to Units completed and transferred out (A+B+C)

$    529,750.00

$   342,500.00

$          187,250.00