Question

A company uses a process costing system. Its Welding Department completed and transferred out 100,000 units during the current period. The ending inventory in the Welding Department consists of 30,000 units (75% complete with respect to direct materials and 40% complete with respect to conversion costs). Determine the equivalent units of production for the Welding Department for direct materials and conversion costs assuming the weighted average method.

Answer 1

Answer and Explanation:

The computation of equivalent units of production for direct materials and conversion costs is shown below:-

                                  Direct material          Conversion

Completed                   100,000                    100,000

Ending Work in progress  

Direct material             22,500

(30,000 × 0.75)

Conversion                                                      12,000

(30,000 × 0.40)

Equivalent Units of

Production                   122,500                          112,000

So, to reach the equivalent units of production of direct material we simply added the completed and transferred out units with direct material and for conversion we added the completed and transferred out units with conversion units.