Question

Equivalent Units of Conversion Costs The Rolling Department of Oak Ridge Steel Company had 10,712 tons in beginning work in process inventory (70% complete) on July 1. During July, 82,400 tons were completed. The ending work in process inventory on July 31 was 7,416 tons (60% complete). What are the total equivalent units for conversion costs? Round to the nearest whole unit. 83,636 units

Answer 1

Answer:

Total equivalent unit          86,688

Explanation:

We will use the weighted average method of valuation.

Under the weighted average method of valuation, to account for completed units, it is assumed that the entire degree of work required is done in the period under consideration. So there is no separation of the completed units into opening inventory and fully worked.

Equivalent units = Degree of completion (%) × Number of units

Item                       Tons                Working                  Equivalent units

Completed unit    82,400               82,400× 100%            82,400

Closing inventory  7,416               7,416  × 60%               7,416        

Total equivalent unit                                                         86,687.6