Question

Graham Petroleum produces oil. On May 1, it had no work-in-process inventory. It started production of...

Graham Petroleum produces oil. On May 1, it had no work-in-process inventory. It started production of 211 million barrels of oil in May and shipped 176 million barrels in the pipeline. The costs of the resources used by Graham in May consist of the following:

Materials $ 2,827 million
Conversion costs (labor and overhead) $ 3,280 million


Required:

The production supervisor estimates that the ending work in process is 60 percent complete on May 31. Compute the cost of oil shipped in the pipeline and the amount in work-in-process ending inventory as of May 31. (Do not round intermediate calculations. Enter your answers in millions. For example, enter "1" instead of "1,000,000".)

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Answer #1
a. Production Started            211 million barrels
Completed            176 million barrels
Ending Work in process               35 million barrels
b. Equivalent Units of Production =            176 Million + 35 Million * 60% =            197
c. Cost per equivalent units:
Materials $    2,827 Million
Conversion Costs $    3,280 Million
Total Costs $    6,107 Million
÷ Equivalent units            197 Million
Cost per equivalent unit $    31.00
Equivalent Units Cost per unit Total Cost  
d. Costs of units completed =            176 $    31.00 $    5,456
Costs of Ending work in process =               21 $    31.00 $        651
Thus,
Cost of oil shipped in the pipeline   $    5,456 million
Amount in work-in-process ending inventory as of May 31 $        651 million
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