Computing equivalent units and assigning costs to completed units and ending WIP invento...

Computing equivalent units and assigning costs to completed units and ending WIP inventory; two materials, added at different points; no beginning inventory or cost transferred in [30-45 min]

Hall’s Exteriors produces exterior siding for homes. The Preparation Department begins with wood, which is chopped into small bits. At the end of the process, an adhesive is added. Then the wood/adhesive mixture goes on to the Compression Department, where the wood is compressed into sheets. Conversion costs are added evenly throughout the preparation process. January data for the Preparation Department are as follows (in millions):

Requirements

1. Draw a time line for the Preparation Department.

2. Use the time tine to help you compute the equivalent. (Hint: Each direct material added at a different point in the production process requires its own equivalent unit computation.)

3. Compute the total costs of the units (sheets)

a. Completed and transferred out to the Compression Department.

b. In the Preparation Department’s Ending work in process inventory.

4. Prepare the journal entry to record the cost of the sheets completed and transferred out to the Compression Department.

5. Post the journal entries to the Work in process inventory—Preparation T-account. What is the ending balance?