Question

Process Costing. Company manufactures Chemical X. Assume the company uses weighted average. Separate direct materials and conversion costs. Chemical X is comprised of two liquids, Liquid A and Liquid B. The formula of Chemical X is 60% Liquid A, 40% Liquid B. 70% of the mixed liquid is added at the beginning of the process; 30% added at the very end. The average cost of the raw materials is $35 per gallon. At the beginning of the month, there was 1,500 gallons in process, 40% through the process (as to conversion costs). The total costs in beginning WIP is $36,750 for materials and $97,440 for conversion costs. During the month, 15,000 gallons were started. Conversion costs were $455,400 for the month. Compute direct material costs (hint use DM EUP under FIFO). At the end of the month, there were 1,200 gallons in process, 80% through the process. Answer each question separately.

a. How many units were started AND completed? Completed?

b. Using FIFO, calculate equivalent units produced

c. What is the cost of the material added? (hint: use b.).

d. Using FIFO, calculate the cost per equivalent unit produced.

e. Using FIFO, what is the journal entry for the transferred to finished goods?

f. Using FIFO, what are the unit costs? (hint: you should have 2 numbers)

g. Using WA, calculate equivalent units of production.

h. Using WA, what is the cost per equivalent unit of production.

i. Using WA, what is journal entry for transferred to finished goods?

j. Using WA, what is the cost per unit?

Answer 1

Process Manufacturing with FIFO

a.Calculation of units that were started and completed:

= Opening gallons + gallons added - Closing gallons

= 1,500 gallons + 15,000 gallons - 1,200 gallons

= 15300 gallons

b.

Particulars	Whole units	Equivalent units	900 (1,500 gallons x 60%)
Direct Material	Conversion Costs	450=(1,500 gallons x 30%)
Beginning Inventory	1,500
Units Started and completed	15300	15,300	15300
Closing Inventory	1,200	960 (1,200 gallons x 80%)	960 (1,200 gallons x 80%)
Equivalent unit		16710	17160

c.

Cost of the material added = 16710 gallons x $ 35 per gallon = $584850

d.

Calculation of cost per equivalent unit produced

Direct Material = $ 35 per gallon (given)

Conversion Cost = $ 455400/17160 gallons = $26.53 gallon

(as per ans guidlines 4 questions answered , if the ans was helpful pls hit thumps up)