Appendix EX 20-28 Cost per equivalent unit: average cost method The following information concerns production in the Forging Department for June. The Forging Department uses the average cost method. ACCOUNT Work in Process-Forging Department ACCOUNT NO. Balance Date Item Debit Credit Debit Credit June 1 Bal., 500 units, 40% completed 5,000 30 Direct materials, 3,700 units 49,200 54,200 30 Direct labor 25,200 79,400 30 Factory overhead 25,120 104,520 30 Goods transferred, 3,600 units ? 30 Bal., 600 units, 70% completed ? a. Determine the cost per equivalent unit. b. Determine cost of units transferred to Finished Goods. Determine the cost of units in ending Work in Process

FINANCIAL ACCOUNTING
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Chapter1: Financial Statements And Business Decisions
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## Appendix EX 20-28: Cost per Equivalent Unit – Average Cost Method

### Overview

The information provided relates to the production activities in the Forging Department for the month of June. The department utilizes the average cost method to track costs.

### Account: Work in Process—Forging Department

#### Table of Transactions

| Date | Item | Debit | Credit | Balance Debit | Balance Credit |
|------|------|-------|--------|---------------|----------------|
| June 1 | Bal., 500 units, 40% completed | | | 5,000 | |
| June 30 | Direct materials, 3,700 units | 49,200 | | 54,200 | |
| June 30 | Direct labor | 25,200 | | 79,400 | |
| June 30 | Factory overhead | 25,120 | | 104,520 | |
| June 30 | Goods transferred, 3,600 units | | ? | ? | |
| June 30 | Bal., 600 units, 70% completed | | | ? | ? |

### Analysis Tasks

a. **Determine the cost per equivalent unit.**

b. **Determine the cost of units transferred to Finished Goods.**

c. **Determine the cost of units in ending Work in Process.**

### Detailed Explanation

- **Beginning Inventory (June 1):** 500 units at 40% completion relate to initial work in progress. The balance is recorded as 5,000 in debit.
  
- **Additions during June (June 30):** 
  - **Direct Materials:** 3,700 units are added with a debit cost of 49,200.
  - **Direct Labor:** The debit cost recorded is 25,200.
  - **Factory Overhead:** This also stands at a debit cost of 25,120.

- **Transferred Goods:** 3,600 units were transferred, indicating completed production, but the exact debit and credit amounts need to be determined (?).

- **Ending Inventory (June 30):** 600 units at 70% completion, with missing exact cost amounts.

This account serves to illustrate the movement and allocation of production costs within the department, highlighting the significance of measuring and assigning costs through equivalent units under the average cost method.
Transcribed Image Text:## Appendix EX 20-28: Cost per Equivalent Unit – Average Cost Method ### Overview The information provided relates to the production activities in the Forging Department for the month of June. The department utilizes the average cost method to track costs. ### Account: Work in Process—Forging Department #### Table of Transactions | Date | Item | Debit | Credit | Balance Debit | Balance Credit | |------|------|-------|--------|---------------|----------------| | June 1 | Bal., 500 units, 40% completed | | | 5,000 | | | June 30 | Direct materials, 3,700 units | 49,200 | | 54,200 | | | June 30 | Direct labor | 25,200 | | 79,400 | | | June 30 | Factory overhead | 25,120 | | 104,520 | | | June 30 | Goods transferred, 3,600 units | | ? | ? | | | June 30 | Bal., 600 units, 70% completed | | | ? | ? | ### Analysis Tasks a. **Determine the cost per equivalent unit.** b. **Determine the cost of units transferred to Finished Goods.** c. **Determine the cost of units in ending Work in Process.** ### Detailed Explanation - **Beginning Inventory (June 1):** 500 units at 40% completion relate to initial work in progress. The balance is recorded as 5,000 in debit. - **Additions during June (June 30):** - **Direct Materials:** 3,700 units are added with a debit cost of 49,200. - **Direct Labor:** The debit cost recorded is 25,200. - **Factory Overhead:** This also stands at a debit cost of 25,120. - **Transferred Goods:** 3,600 units were transferred, indicating completed production, but the exact debit and credit amounts need to be determined (?). - **Ending Inventory (June 30):** 600 units at 70% completion, with missing exact cost amounts. This account serves to illustrate the movement and allocation of production costs within the department, highlighting the significance of measuring and assigning costs through equivalent units under the average cost method.
**Exercise 20-28**

**b.**  
- Transferred to Packing Department  
- Inventory in process, ending  

**Equivalent Units of Production**

**c.**  
- Cost per equivalent unit  

**d.**  
- Cost of units transferred to FG  

**e.**  
- Cost of units in ending WIP  

This exercise involves tracking production costs and inventory for a manufacturing process. It addresses the determination of equivalent units of production, calculation of cost per equivalent unit, and total costs for finished goods (FG) and work in process (WIP).
Transcribed Image Text:**Exercise 20-28** **b.** - Transferred to Packing Department - Inventory in process, ending **Equivalent Units of Production** **c.** - Cost per equivalent unit **d.** - Cost of units transferred to FG **e.** - Cost of units in ending WIP This exercise involves tracking production costs and inventory for a manufacturing process. It addresses the determination of equivalent units of production, calculation of cost per equivalent unit, and total costs for finished goods (FG) and work in process (WIP).
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