The Rolling Department of Oak Ridge Steel Company had 4,830 tons in beginning work in process inventory (90% complete) on July 1. During July, 48,300 tons were completed. The ending work in process inventory on July 31 was 3,864 tons (90% complete). What are the total equivalent units for conversion costs? Round to the nearest whole unit.
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
The Rolling Department of Oak Ridge Steel Company had 4,830 tons in beginning work in process inventory (90% complete) on July 1. During July, 48,300 tons were completed. The ending work in process inventory on July 31 was 3,864 tons (90% complete).
What are the total equivalent units for conversion costs? Round to the nearest whole unit.
In most of the process industries like, Paper, medicines, soaps, chemicals, rubber, etc. where manufacturing is a continuous activity. The reason is that cost incurred in such industries represents the cost of work carried on opening work-in-progress, closing work-in-progress, and completed units. Thus, to calculate the cost of each completed unit, cost of work-in-progress in the beginning and at the end of the process.
Work-in-progress can be valued on actual basis, i.e., materials used on the unfinished units and the actual amount of labor expenses incurred. However, the degree of accuracy in such case cannot be satisfactory. An alternative method is based on converting partly finished units into equivalent finished units.
Equivalent production means converting the completed production units into their equivalent completed units. Under each process, an estimate is made of the percentage completion of work-in-progress with regard to different elements of costs such as material, labor, and overhead. The formula for calculating equivalent completed units is:
Equivalent completed units
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