Question

Moon Gazers, Inc., produces telescopes for use by high school students. All direct materials used in the production of telescopes are added at the beginning of the manufacturing process. Labor and overhead are added evenly thereafter, as each unit is assembled, adjusted, and tested. Moon Gazers uses process costing and had the following unit production information available for the months of January and February.

	Jan.		Feb.
Number of units in beginning work in process inventory	0		120
Number of units started during the month	300		400
Total number of units transferred to finished goods	180		320

The units remaining in work in process at the end of January were approximately 60 percent complete. During the month of February, all of the beginning work in process units were completed and the units remaining in work in process at the end of the month were approximately 80 percent complete.

a. For the month of January, calculate the equivalent units produced for each of the two cost categories—direct materials and labor and overhead.

b. For the month of February, calculate the equivalent units produced for each of the two cost categories—direct materials and labor and overhead.

Answer 1

	Jan.	Feb.
Number of units in beginning work in process inventory	0	120
(+) Number of units started during the month	300	400
(-) Total number of units transferred to finished goods	180	320
Ending work in process inventory	120	200
	Jan.	Feb.
Total number of units transferred to finished goods	180	320
(-) Number of units in beginning work in process inventory	0	120
Units started and completed during the month	180	200

As the materials are added at the beginning of the process, they 100% completed when they are introduced in the process .

a.
	Direct materials	Labor and overhead
Units started and completed during the period	180	180
(+) Beginning work in process equivalent units [ Beginning work in process units * ( 100% - % Completion ) ]	0	0
(+) Ending work in process equivalent units [ Ending work in process units * % Completion ]	120 [ 120*100% ]	72 [ 120*60% ]
Equivalent units produced in January	300	252

b.
	Direct materials	Labor and overhead
Units started and completed during the period	200	200
(+) Beginning work in process equivalent units [ Beginning work in process units * ( 100% - % Completion ) ]	0 [ 120*(1-100%) ]	48 [ 120*(1-100%) ]
(+) Ending work in process equivalent units [ Ending work in process units * % Completion ]	200 [ 200*100% ]	160 [ 200*80% ]
Equivalent units produced in February	400	408