Question: Why is the calculation of equivalent units of production needed in a process costing system?
The equivalent units of production needed in a process costing system. It is so because the company is required to know the cost of each single unit of the product to decide the selling proce per unit.
Under the process costing system, cost is calculated for the entire process of the production. It is used by the companies producing large number of similar goods.
The unit cost of the product is required to be calculated. It is calculated by dividing the total cost of production with the total number of units produced during the year. Hence, the company is needed to know the equivalent units of production
Refer to Short Exercise S18A-15. At Spring Fresh, water is added at the beginning of the filtration process. Conversion costs are added evenly throughout the process. Now assume that in February, 130,000 liters were completed and transferred out of the Filtration Department into the Bottling Department. The 70,000 liters remaining in Filtration’s ending Work-in-Process Inventory were 80% of the way through the filtration process. Recall that Spring Fresh has no beginning inventories.
Compute the equivalent units of production for direct materials and conversion
costs for the Filtration Department using the FIFO method.
Casey Carpet manufactures broadloom carpet in seven processes: spinning, dyeing, plying, spooling, tufting, latexing, and shearing. In the Dyeing Department, direct materials (dye) are added at the beginning of the process. Conversion costs are incurred evenly throughout the process. Information for July 2018 follows:
Beginning work-in-process inventory
Transferred in from spinning department during July
Completed during July
Ending work in process inventory (80% complete for conversion work)
Beginning work in process inventory (transferred in costs, $3,700, material costs, $1,450 conversion costs, $4,950)
Transferred in from the spinning department
Material costs added during July
Conversion costs added during July (Manufacturing wages, $8,050; manufacturing overhead allocated, $45,422)
1. Prepare a production cost report for Casey’s Dyeing Department for July. The
company uses the weighted-average method.
2. Journalize all transactions affecting Casey’s Dyeing Department during July, including the entries that have already been posted. Assume labor costs are accrued and not yet paid.
For each of the following products or services, indicate if the cost would most likely be determined using a job order costing system or a process costing system.
a. Soft drinks
b. Automobile repairs
c. Customized furniture
d. Aluminum foil
e. Lawn chairs
f. Chocolate candy bars
g. Hospital surgery
Preparing a production cost report, second department, with beginning WIP and transferred in costs; journal entries; FIFO method Work Problem P18-40B using the FIFO method. The Mixing Department beginning work in process of 400 units is 80% complete as to both direct materials and conversion costs. Round equivalent unit costs to four decimal places. Round all other costs to the nearest dollar.
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