Question

Graham Petroleum produces oil. On May 1, it had no work-in-process inventory. It started production of 201 million barrels of oil in May and shipped 181 million barrels in the pipeline. The costs of the resources used by Graham in May consist of the following: Materials Conversion costs (labor and overhead) $2,174 million $3,230 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".) million Cost of oil shipped in the pipeline Work-in-process ending inventory million

Answer 1

Solution

Cost of oil shipped to pipeline	$                  4,987
Work in process ending inventory	$                      417

Working

Reconciliation of Units
A	Beginning WIP	-
B	Introduced	201
C=A+B	TOTAL	201
D	Transferred out	181
E=C-D	Ending WIP	20

.

Statement of Equivalent Units(Weighted average)
				Material		Conversion cost
	Units			Complete %	Equivalent units	Complete %	Equivalent units
Transferred out	181			100%	181	100%	181
Ending WIP	20			100%	20	60%	12
Total	201			Total	201	Total	193

.

Cost per Equivalent Units (Weighted average)
COST		Material	Conversion cost	TOTAL
Beginning WIP Inventory Cost				$ 0
Cost incurred during period		$ 2,174	$ 3,230	$ 5,404
Total Cost to be accounted for		$ 2,174	$ 3,230	$ 5,404
Total Equivalent Units		201	193
Cost per Equivalent Units		$                 10.82	$                   16.74	$             27.55

.

Statement of cost (Weighted average)
Cost	Equivalent Cost/unit	Ending WIP		Shipped to pipeline
		Units	Cost Allocated	Units	Cost Allocated
Material	$ 10.82	20	$                216.32	181	$            1,957.68
Conversion cost	$ 16.74	12	$                200.83	181	$            3,029.17
TOTAL	$ 5,404	TOTAL	$ 417	TOTAL	$ 4,987