Question

To correctly allocate costs to products within a continuous production environment, we are required to cost both the units completed and the partially complete units still in Work in Process (WIP). To achieve this, we use the concept of equivalent units: Calculate the equivalent complete units based on the level of completion of the partially complete WIP. Complete the following: A company had 1997 units in opening WIP and started 19886 during the month and completed 13850 units and the closing WIP units were 100% complete in relation to Direct Materials (DM) and 52% complete in relation to Conversion Costs (CONV). The company's costs (including opening WIP and Incurred during the month were: DM costs $116054 and CONV costs $51305. Calculate the TOTAL (i.e. including both completed and closing WIP) equivalent units for this month IN RELATION TO CONVERSION?

Answer 1

The TOTAL equivalent units for Conversion Costs (CONV) are calculated by adding the completed units (13850 units) and the equivalent units for conversion in the WIP inventory (3138.72 units), which equals to 16988.72 units for the month.

Step-by-step explanation:

The student has asked how to calculate the TOTAL equivalent units for the month in relation to Conversion Costs (CONV) within a continuous production environment. To do this, the concept of equivalent units is used which requires a calculation that accounts for both completed units and the percentage completion of units in Work in Process (WIP).

First, we calculate the equivalent units for the completed production, which is simply the number of units completed. Next, we find the equivalent units for the WIP inventory, by taking the number of units and multiplying by the percentage completion. Finally, we add these two numbers to get the total equivalent units.

Here, the company completed 13850 units, and the ending WIP was 100% complete for Direct Materials and 52% complete for CONV. Since we're only looking at CONV, we'll consider that percentage.

Calculation:

1. Completed units = 13850 units (100% complete for CONV)
2. Ending WIP units = 19886 - 13850 = 6036 units
3. Equivalent units for CONV in WIP = 6036 units x 52% = 3138.72 units
4. Total equivalent units for CONV = Completed units + Equivalent units for CONV in WIP = 13850 units + 3138.72 units = 16988.72 units

So, the TOTAL equivalent units for CONV for the month are 16988.72 units.