ABC Company produces a single product. Material A is added at the start of the p
ID: 2358771 • Letter: A
Question
ABC Company produces a single product. Material A is added at the start of the production process and packaging material B is added at the end of the process. Conversion costs are incurred uniformly throughout the process. Inspection takes place when manufacturing is completed, but before packaging Material B is added. Normal spoilage for this production process is 5% of good output. Spoiled units are discarded. Production data for this year was as follows: Beginning work-in-process inventory (20% complete) 2,000 units Units started 18,000 units Good units completed and sold 16,000 units Ending work-in-process inventory (40% complete) 1,000 units What are equivalent units for Material A, Material B, and Conversion costs? Show work, please. Thank you.Explanation / Answer
Facts given: Units / DM / CC Beg inv: 17,000 / 15% / 15% Added: ..23,000 (forced number) T/O: .....(25,000) End Inv: 15,000 / 30% / 30% EU Produced under FIFO: (1) EU required to complete Beg Inv, both in DM & CC - 85% of 17,000 = 14,450 (2) Units started and completed: Either a) Added 23,000 less End Inv 15,000 = 8,000 Or b) T/O 25,000 less Beg Inv 17,000 = 8,000 (3) EU in End Inv: 15,000 x 30% = 4,500 Total EU Produced: 14,450 + 8,000 + 4,500 = 26,950