Section C Equivalent Units The Peace Hall Manufacturing Company provides the fol

Question

Section C Equivalent Units The Peace Hall Manufacturing Company provides the following information concermning the work-in-process at its plant: Beginning inventory, 98,000 units- -(materials are 100 percent complete; conversion costs are 20 percent complete). Started this month, 252,000 units. Transferred out, 210,000 units. Ending inventory, 140,000 units- (materials are 100 percent complete; conversion costs are 30 percent complete). Compute the equivalent units for materials and conversion costs using the weighted-average method. 1. 2. Compute the equivalent units for materials and conversion costs using the FIFO method.

Explanation / Answer

When we are using weighted average, method we take two items into consideration (1) Finished and transfered out and (2) Ending WIP.

Finished and transfered out 210000 units, shall not be subdivided into Beginning WIP and Started and finished. Hence we take all 210000 units and use 100% completion for them.

Using FIFO

Here also we consider only two items (1) Finished and transfered out and (2) Ending WIP. But we have to sub-divide (1) finished and transfered out 210000 units as Beginning WIP (98000) and started and finished ( 112000)

Explanation

The first two rows of the table needs clear understanding. 210,000 units of finished goods are shown in to two seperate entries under FIFO method. (1) Beginning Inventory ....... for which 100% of material cost is already incurred in previous month, so we put 0% and 0 Units in respective colums of material. Again in the case of conversion, question says 20% completed previously so to finish it up, we added 80% and 78400 equivalent units in respective columns of conversion.

         Materials           Conversion Units % Units % Units Finished and transferred out 210000 100 210000 100 210000 Ending Work in process 140000 100 140000 30 42000                 Equivalent units ( Weighted average) 350000 252000

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