7) LDR Manufacturing products a pesticide chemical and uses process costing. The

Question

7) LDR Manufacturing products a pesticide chemical and uses process costing. There are three processing departments-Mixing, Refining, and Packaging. On January 1, 2014, the first department -Mixing-had no beginning inventory. During January, 40,000 fl oz. of chemicals were started in production. Of these, 32,000 fl oz. were completed and 8,000 fl. oz. remained in process. In the Mixing Department, all direct materials are added at the beginning of the production process and conversion costs are applied evenly through the process.

Explanation / Answer

7. equivalent units in ending inventory = % completion with respect to conversion costs*units remaining in process

= 60%*8,000 = 4,800 units. so the answer is option "c".

8. cost per EUP for conversion costs: conversion costs include direct labor and factory overhead. It does not include direct materials. costs = $75,000. equivalent units = 800.

cost per EUP for conversion costs = costs/equivalent units = 75,000/800 = $93.75 per EUP - option "D"

9. The production cost report calculates costs assigned to units transferred out and costs assigned to ending WIP inventory. WIP is a current account in the balance sheet. It also determines the cost assigned to units completed and transferred out. So the answer is option "a" - to determine the balance of inventory accounts.

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