Question

Weatherly Lumber Company processes wood pulp for manufacturing various paper products. The company employs a process costing system for its manufacturing operations. All direct materials are added at the beginning of the process, and conversion costs are incurred uniformly throughout the process. This is the company’s production schedule for May:

		Percent Completed
	Tons of Pulp	Materials		Conversion
Work-in-Process Inventory, May 1	2,000	100	%	50	%
Started during May	11,000
Units to account for	13,000
Units from beginning Work-in-Process, which were completed and transferred out during May	2,000
Started and completed during May	6,600
Work-in-Process Inventory, May 31	4,400	100	%	50	%
Total units accounted for	13,000

The following cost data are available:

Work-in-Process Inventory, May 1
Direct materials	$	38,010
Conversion		46,568
Costs incurred during May
Direct materials		168,300
Conversion		275,380

Required:

1. Calculate the equivalent units of direct materials and conversion during May. Use the FIFO method.

	Equivalent Units
Direct Materials
Conversion

2. Calculate the cost per equivalent unit for both direct materials and conversion during May. Use the FIFO method.

	Cost per Equivalent Unit
Direct Materials
Conversion

Answer 1

		Percent Completed
	Tons of Pulp	Materials		Conversion
Work-in-Process Inventory, May 1	2,000	100	%	50	%
Started during May	11,000
Units to account for	13,000
Units from beginning Work-in-Process, which were completed and transferred out during May	2,000
Started and completed during May	6,600
Work-in-Process Inventory, May 31	4,400	100	%	50	%
Total units accounted for	13,000

The following cost data are available:

Work-in-Process Inventory, May 1
Direct materials	$	38,010
Conversion		46,568
Costs incurred during May
Direct materials		168,300
Conversion		275,380

Required:

1. Calculate the equivalent units of direct materials and conversion during May. Use the FIFO method.

	Equivalent Units
Direct Materials	11000
Conversion	(2000*50%+6600+4400*50%) = 9800

2. Calculate the cost per equivalent unit for both direct materials and conversion during May. Use the FIFO method.

	Cost per Equivalent Unit
Direct Materials	168300/11000 = 15.30
Conversion	275380/9800 = 28.10