Concept explainers
(a)
Introduction:
To compute:
The physical units missing in the table and numbers of inventory stated and completed during each month.
Answer to Problem 6E
To reconcile the number of physical units:
February:
Units started = 48,000units
June:
Units transferred out = 47,000 units
September:
Units in beginning inventory = 1,800 units
December:
Units in ending inventory = 7,000 units
Number of units started and completed each month February:
Units started and completed = 35,000units
June:
Units started and completed = 38,600 units
September:
Units started and completed = 48,200 units
December:
Units started and completed = 37,000 units
Explanation of Solution
To reconcile the number of physical units:
Reconciling the number of physical units (FIFO method) using the formula given below:
Beginning inventory (WIP) + Units started = Units completed + closing inventory (WIP)
Thus for February, Units Started
For June, units completed
For September, Beginning inventory
For December, Closing inventory
As we understand that in First in First out method, the determination of beginning and completed units is required. Thus the formula to calculate the same is:
Units started and completed = Units completed-Units in beginning inventory
Or
Units started and completed = Units started-Units in closing inventory
Thus, for February Units started and completed:
ForJune, Units started and completed
For September, Units statted and completed
For December Units stated and completed
(b)
Introduction:
Process costing is a system in which production cost are allocated to individual production stages used in the manufacturing process. In this process, production is continuous and divided into number of processes.
To compute:
The number of equivalent units for both material and conversion for each month using FIFO method.
Explanation of Solution
Physical units | equivalent units | ||
Direct material | Conversion | ||
February | |||
Beginning inventory | 3,000 | 0 | 1,500 (3,000×15%) |
Units started and completed | 35,000 | 35,000 | 3,5000 |
Closing inventory | 13,000 | 13,000 | 3,900 (13,000×30%) |
Total | 51,000 | 48,000 | =40,400 |
June | |||
Beginning inventory | 8,400 | 0 | 6,300 (84,00×75%) |
Units started and completed | 38,600 | 38,600 | 38,600 |
Closing inventory | 8,000 | 8,000 | 3,600 (8,000×45%) |
Total | 55,000 | 46,600 | 48,500 |
September | |||
Beginning inventory | 1,800 | 0 | 360 (1,800×45%) |
Units started and completed | 48,200 | 48,200 | 48,200 |
Closing inventory | 4,600 | 4,600 | 2,760 (4,600×60%) |
Total | 54,600 | 52,800 | 51,320 |
December | |||
Beginning inventory | 5,800 | 0 | 1,740 (5,800×30%) |
Units started and completed | 37,000 | 37,000 | 37,000 |
Closing inventory | 7,000 | 7,000 | 4,900 (7,000×70%) |
Total | 49,800 | 44,000 | 43,640 |
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Chapter 3 Solutions
Managerial Accounting
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