
1.
a.
Calculate the costs per equivalent unit for direct materials and conversion using the FIFO method.
1.
a.

Explanation of Solution
Equivalent units: Equivalent units are the number of units that could have been performed given the amount of work actually performed, and for both partially complete units and complete units, the quantity of other production inputs used.
Calculate the costs per equivalent unit:
Production Quantity Information | ||||
Physical Units | Direct Materials | Conversion | ||
Input | 100% | 20% | ||
Beginning WIP | 4,000 | (4,000) | (800) | |
Units started | 18,000 | |||
Units to account for | 22,000 | |||
Output | 100% | 40% | ||
Units Finished | 17,000 | 17,000 | 17,000 | |
Ending WIP | 5,000 | 5,000 | 2,000 | |
Units accounted for | 22,000 | |||
Total Equivalent units | 18,000 | 18,200 | ||
Unit Cost Determination | ||||
Direct Materials | Conversion | Total | ||
Beginning WIP | - | - | - | |
Current Costs | $59,040 | $92,092 | $151,132 | |
Divide by: Equivalent units | 18,000 | 18,200 | ||
Costs per equivalent unit | $3.2800 | $5.0600 | $8.3400 |
Table (1)
Hence, the costs per equivalent unit for direct materials is $3.2800, and for conversion is $5.0600.
b.
Calculate the costs of goods completed and transferred out.
b.

Explanation of Solution
Transferred-out costs: The costs that are incurred at the time of production of the previous process. These costs are brought to the next process to calculate the total production cost. The transferred in costs include the cost of direct materials and the conversion cost of the previous process.
Calculate cost of goods completed and transferred out.
Hence, the costs of goods completed and transferred out is $141,780.
c.
Calculate the costs remaining in the Work-in-process inventory account.
c.

Explanation of Solution
Calculate Ending WIP inventory for direct materials.
Calculate Ending WIP inventory for conversion.
Hence, the cost of the Work-in-process inventory at October 31 is $16,400, and for conversion is $10,120.
2.
Discuss the exchange rate between the Country U dollar and Country C yuan.
2.

Explanation of Solution
The responsibility of the controller is to prepare accurate production reports. The request by the manager is the violation of this responsibility of the controller. The best available estimate of percentage completion is to be used by the controller as required by the ethical principles of integrity and objectivity.
Production Quantity Information | ||||
Physical Units | Direct Materials | Conversion | ||
Input | 100% | 20% | ||
Beginning WIP | 4,000 | (4,000) | (800) | |
Units started | 18,000 | |||
Units to account for | 22,000 | |||
Output | 100% | 60% | ||
Units Finished | 17,000 | 17,000 | 17,000 | |
Ending WIP | 5,000 | 5,000 | 3,000 | |
Units accounted for | 22,000 | |||
Total Equivalent units | 18,000 | 19,200 | ||
Unit Cost Determination | ||||
Direct Materials | Conversion | Total | ||
Beginning WIP | - | - | - | |
Current Costs | $59,040 | $92,092 | $151,132 | |
Divide by: Equivalent units | 18,000 | 19,200 | ||
Costs per equivalent unit | $3.2800 | $4,7965 | $8.0765 |
Table (2)
The change of ending inventory completion from 40% to 60% would have a significant effect on cost per equivalent unit and on equivalent units, as there is a high level of ending work-in-process. The result of this change would be a decline in the total costs per unit from $8.3400 to $8.0765.
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Chapter 6 Solutions
Cost Management
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