Question

Gutierrez, which uses a process-costing system, adds all material at the beginning of production and incurs conversion cost evenly throughout manufacturing. The information that follows relates to the period just ended: Units started and completed: 75,000 Units in ending work-in-process inventory: 15,000, 60% complete Which of the following choices correctly expresses the total equivalent units of production with respect to material and conversion cost? Material Conversion

A. 130,000 130,000
B. 139,540 139,540
C. 145,900 136,360
D. 145,900 139,540
E. 145,900 145,900

Answer 1

The total equivalent units of production for material and conversion cost are 145,900 and 139,540 respectively.

Step-by-step explanation:

The total equivalent units of production for material and conversion cost can be calculated by adding together the units completed and the units in ending work-in-process inventory. For material, the total equivalent units are 75,000 units completed plus 15,000 units in ending work-in-process inventory multiplied by their respective completion percentage of 60%, which equals 90,000 units. For conversion cost, the total equivalent units are the same because conversion cost is incurred evenly throughout manufacturing. Therefore, the correct choice is option D: 145,900 for material and 139,540 for conversion.

Answer 2

• Materials ⇒ 90,000 units
• Conversion ⇒ 84,000 units

Step-by-step explanation:

Materials

Material is added at the beginning of production which means that it is complete at period end.

Equivalent unit of production for Materials:

= Units started and completed + Units in ending WIP

= 75,000 + 15,000

= 90,000 units

Conversion

Ending WIP is only 60% complete conversion wise.

Equivalent unit is therefore:

= Units started and completed + Units in ending WIP

= 75,000 + (15,000 * 60%)

= 84,000 units