Exercise 16-05 a-b (Video) In Waterway Company, materials are entered at the beginning of each process. Work in process inventories, with the percentage of work done on conversion costs, and production data for its Sterilizing Department in selected months during 2020 are as follows. Beginning Work in Process Ending Work in Process Month Units Conversion Cost% Units Transferred Out Units Conversion Cost% January 0 — 11,100 3,100 63 March 0 — 12,300 3,400 40 May 0 — 15,400 7,860 80 July 0 — 10,200 2,200 46 Compute the physical units for January and May. January May Units to be accounted for Beginning work in process Started into production Total units Units accounted for Transferred out Ending work in process Total units Compute the equivalent units of production for (1) materials and (2) conversion costs for each month. Materials Conversion Costs January March May July

(a) Total units for January = 14,200

Total units for May = 23,260

(b). Conversion cost for :

January = 13,053  

March = 13,660

May = 21,688

July = 11,212

Explanation:

As per the data given in the question,

1)

                                                 Jan.                        May

Units to be accounted for

Beginning WIP                            0                            0

Started into production            14,200                   23,260

Total number units                   14,200                   23,260

Units accounted for

Transferred out                         11,100                   15,400

Ending WIP                                 3,100                      7,860

Total units                                 14200                   15400

2)

We can calculate the conversion cost by using following formula:

Conversion cost = Transferred out unit + (Work in process  unit × conversion cost)

                            Material           Conversion cost

Jan.                       14,200                    13,053              (11,100 + 3,100 × 63%)

Mar.                      15,700                     13,660              (12,300 + 3,400 × 40%)

May                       23,260                   21,688             (15,400 + 7,860 × 80%)

July                        12,400                   11,212              (10,200 + 2,200 × 46%)

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