Pitt Enterprises manufactures jeans. All materials are
introduced at the beginning of the manufacturing process in the
Cutting Department. Conversion costs are incurred uniformly
throughout the manufacturing process. As the cutting of material is
completed, the pieces are immediately transferred to the Sewing
Department. Information for the Cutting Department for the month of
May follows.
Work in Process, May 1 (54,000 units, 100% complete for direct
materials, 70% complete with respect to conversion costs; includes
$70,900 of direct material cost; $34,220 of conversion
costs).
Units started in May | 120,000 | |
Units completed in May | 138,000 | |
Work in Process, May 31 (36,000 units, 100% complete for direct
materials; 60% complete for conversion costs).
Costs incurred in May | |||
Direct materials | $ | 342,400 | |
Conversion costs | $ | 353,350 | |
If Pitt Enterprises uses the FIFO method of process costing,
compute the equivalent units for direct materials and conversion
respectively for May.
Multiple Choice
120,000 materials; 121,800 conversion.
174,000 materials; 159,600 conversion.
84,000 materials; 84,000 conversion.
121,800 materials; 120,000 conversion.
121,800 materials; 121,800 conversion.
Solution:
Pitt Enterprises | |||
Cutting Department | |||
Computation of Equivalent unit (FIFO) | |||
Particulars | Physical units | Material | Conversion |
Units to be accounted for: | |||
Beginning WIP Inventory | 54000 | ||
Units started this period | 120000 | ||
Total unit to be accounted for | 174000 | ||
Units Accounted for: | |||
Units completed and transferred out | |||
From beginning inventory Material - 0% Conversion - 30% |
54000 | 0 | 16200 |
Started and completed currently | 84000 | 84000 | 84000 |
Transferred to finished goods | 138000 | 84000 | 100200 |
Units in ending WIP Material - 100% Conversion - 60% |
36000 | 36000 | 21600 |
Total units accounted for | 174000 | 120000 | 121800 |
Hence first option is correct.
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