
Concept explainers
EXERCISE 4A-6 Equivalent
Refer to the data for Alaskan Fisheries, Inc., in Exercise 4-10.
Required:
Compute the Cleaning Department's equivalent units of production for materials and for labor and overhead for July.
Requirement 1:-

- Equivalent units of production for materials and conversion for July
Answer to Problem 6E
Solution:
- Equivalent units of production
Particulars | Direct Materials | Conversion Cost |
Opening Units in WIP (A) | 10,000 | 10,000 |
% of Completion of Opening WIP (B) | 100% | 30% |
% of Opening WIP completed this period [C = 100%-B] | 0% | 70% |
Equivalent units in beginning WIP [D=A×C] | 0 | 7,000 |
Units started and completed in current period (E) | 150,000 | 150,000 |
Units closing WIP (F) | 20,000 | 20,000 |
% of completion of closing WIP (G) | 100% | 40% |
Equivalent units in closing WIP (H=F×G) | 20,000 | 8,000 |
Total equivalent units [D+E+H] | 170,000 | 165,000 |
Explanation of Solution
Explanation:-
Given:
Following data available for the month of July:-
Particulars | Direct Materials | Conversion Cost |
Opening Units in WIP | 10,000 | 10,000 |
% of Completion of Opening WIP | 100% | 30% |
Units started into production | 170,000 | 170,000 |
Units closing WIP | 20,000 | 20,000 |
% of completion of closing WIP | 100% | 40% |
Cost of Opening WIP | $8,500 | $4,900 |
Cost added during the month | $139,400 | $244,200 |
Formula used:
Calculation:
Particulars | Direct Materials | Conversion Cost |
(i) Total equivalent units | 170,000 | 165,000 |
Requirement 2:-

- Cost per equivalent unit for materials and conversion for July
Answer to Problem 6E
Solution:
- Cost per equivalent unit
Particulars | Direct Materials | Conversion Cost |
Cost of Opening WIP (A) | $8,500 | $4,900 |
Cost added during the period (B) | $139,400 | $244,200 |
Equivalent units of production (C) | 170,000 | 165,000 |
Cost per Equivalent Unit [A+B]÷C | $0.87 | $1.51 |
Explanation of Solution
Explanation:-
Given:
Following data available for the month of July:-
Particulars | Direct Materials | Conversion Cost |
Opening Units in WIP | 10,000 | 10,000 |
% of Completion of Opening WIP | 100% | 30% |
Units started into production | 170,000 | 170,000 |
Units closing WIP | 20,000 | 20,000 |
% of completion of closing WIP | 100% | 40% |
Cost of Opening WIP | $8,500 | $4,900 |
Cost added during the month | $139,400 | $244,200 |
Formula used:
Calculation:
Particulars | Direct Materials | Conversion Cost |
(ii) Cost per Equivalent Unit | $0.87 | $1.51 |
Requirement 3:-

iii. Cost of ending work in process inventory for materials, conversion, and in total for July
Answer to Problem 6E
Solution:
iii. Cost of Closing WIP
Particulars | Direct Materials | Conversion Cost |
Equivalent units in closing WIP (A) | 20,000 | 8,000 |
Cost per Equivalent Unit (B) | $0.87 | $1.51 |
Cost of Closing WIP (A×B) | $17,400 | $12,080 |
Total Cost of Closing WIP = 17,400 +12,080 =29,480
Explanation of Solution
Explanation:-
Given:
Following data available for the month of July:-
Particulars | Direct Materials | Conversion Cost |
Opening Units in WIP | 10,000 | 10,000 |
% of Completion of Opening WIP | 100% | 30% |
Units started into production | 170,000 | 170,000 |
Units closing WIP | 20,000 | 20,000 |
% of completion of closing WIP | 100% | 40% |
Cost of Opening WIP | $8,500 | $4,900 |
Cost added during the month | $139,400 | $244,200 |
Formula used:
Calculation:
Particulars | Direct Materials | Conversion Cost |
(iii) Cost of Closing WIP | $17,400 | $12,080 |
Requirement 4:-

iv. Cost of units transferred out to the next department for materials, conversion and in total for July
Answer to Problem 6E
Solution:
iv. Cost of units transferred out to other department
Particulars | Direct Materials | Conversion Cost |
Opening Units in WIP (A) | 10,000 | 10,000 |
% of Completion of Opening WIP (B) | 100% | 30% |
% of Opening WIP completed this period [C = 100%-B] | 0% | 70% |
Equivalent units in beginning WIP [D=A×C] | 0 | 7,000 |
Units started and completed in current period (E) | 150,000 | 150,000 |
Equivalent units which are transferred out (F=D+E) | 150,000 | 157,000 |
Cost per Equivalent Unit (G) | $0.87 | $1.51 |
Cost of transferred units (F×G) | $130,500 | $237,070 |
Total Cost of transferred units = 130,500 +237,070 =367,570
Explanation of Solution
Explanation:-
Given:
Following data available for the month of July:-
Particulars | Direct Materials | Conversion Cost |
Opening Units in WIP | 10,000 | 10,000 |
% of Completion of Opening WIP | 100% | 30% |
Units started into production | 170,000 | 170,000 |
Units closing WIP | 20,000 | 20,000 |
% of completion of closing WIP | 100% | 40% |
Cost of Opening WIP | $8,500 | $4,900 |
Cost added during the month | $139,400 | $244,200 |
Formula used:
Calculation:
Particulars | Direct Materials | Conversion Cost |
(iv) Cost of transferred units | $130,500 | $237,070 |
Requirement 5:-

To present:
v. Cost Reconciliation report
Answer to Problem 6E
Solution:
v. Cost reconciliation report
Cost to be accounted for | Amount (in $) |
Cost of Opening WIP | 13,400 |
Cost added during the period | 383,650 |
Cost to be accounted for | 397,050 |
Costs Accounted for | Amount (in $) |
Cost of Closing WIP | 29,480 |
Cost of transferred units | 367,570 |
Costs Accounted for | 397,050 |
Explanation of Solution
Explanation:-
Given:
Following data available for the month of July:-
Particulars | Direct Materials | Conversion Cost |
Opening Units in WIP | 10,000 | 10,000 |
% of Completion of Opening WIP | 100% | 30% |
Units started into production | 170,000 | 170,000 |
Units closing WIP | 20,000 | 20,000 |
% of completion of closing WIP | 100% | 40% |
Cost of Opening WIP | $8,500 | $4,900 |
Cost added during the month | $139,400 | $244,200 |
Formula used:
Calculations:
While calculating cost of transferred units we should subtract cost of closing WIP from sum cost of
opening WIP and cost added during the period as closing units are not yet transferred.
Cost to be accounted for and costs accounted for are reconciled at 397,050.
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