Question

Graham Petroleum produces oil. On May 1, it had no work-in-process inventory. It started production of 244 million barrels of oil in May and shipped 216 million barrels in the pipeline. The costs of the resources used by Graham in May consist of the following:
Materials $6,000 Million
Conversion Cost (Labor and overhead) $7,968 Million
Required:

The production supervisor estimates that the ending work-in-process is 60 percent complete on May 31.

Compute the cost of oil shipped in the pipeline and the amount in work-in-process ending inventory as of May 31. (Do not round intermediate calculations. Enter your answers in millions. For example, enter "1" instead of "1,000,000".)

Answer 1

Answer:

The cost of 216 million barrels of oil shipped is $ 12,960 million

Cost of ending work in process is $1,008 million

Explanation:

The total costs of oil production is computed thus:

                                                       $million

materials                                        6,000

conversion cost                             7,968

total cost                                       13,968

Production started                  244 million

Oil shipped                             216 million

ending work in process         28 million

total equivalent units=216 million+28 million*60%=216 million+16.8 million=232.8  million

cost of oil shipped=$13,968/232.8*216=$ 12,960 million

amount of ending inventory=$13,968-$12,960=$1,008.00