Asked by Kayla Kirkpatrick on Jun 29, 2024
Verified
Jersey Corporation has a process costing system in which it uses the weighted-average method.The equivalent units for conversion costs for the month were 47,500 units.The beginning work in process inventory consisted of 15,000 units, 60% complete with respect to conversion costs.The ending work in process inventory consisted of 10,000 units, 75% complete with respect to conversion costs.The number of units started during the month was:
A) 25,000 units
B) 34,000 units
C) 35,000 units
D) 40,000 units
Weighted-Average Method
An inventory costing method that assigns an average cost to each item in inventory, calculated by dividing the total cost of goods available for sale by the total units available for sale.
Equivalent Units
A concept used in cost accounting to express the amount of work done on units of production in terms of fully completed units.
Conversion Costs
The costs required to convert raw materials into finished products, typically including labor and overhead.
- Acquire knowledge on the topic of equivalent units in the context of process costing.
- Determine the equivalent units for materials and conversion costs employing the weighted-average method.
Verified Answer
Units started = Total units to account for - Beginning inventory
Total units to account for = Beginning inventory + Units started + Units transferred out + Ending inventory
We know that:
- The equivalent units for conversion costs for the month were 47,500 units
- The beginning work in process inventory consisted of 15,000 units, 60% complete with respect to conversion costs
- The ending work in process inventory consisted of 10,000 units, 75% complete with respect to conversion costs
Using the weighted-average method, we can calculate the number of units started as follows:
Total units to account for = 15,000 + Units started + Units transferred out + 10,000
47,500 = (15,000 x 60%) + Units started + (Units transferred out x 100%) + (10,000 x 75%)
47,500 = 9,000 + Units started + Units transferred out + 7,500
Units started + Units transferred out = 47,500 - 16,500 = 31,000
We don't know the number of units transferred out, but we can use the equivalent units information to find it:
Equivalent units for conversion costs = Units transferred out + Equivalent units in ending inventory
47,500 = Units transferred out + (10,000 x 75%)
47,500 = Units transferred out + 7,500
Units transferred out = 40,000
Now we can use the formula above to find the number of units started during the month:
Total units to account for = 15,000 + Units started + 40,000 + 10,000
65,000 = 15,000 + Units started + 40,000 + 10,000
Units started = 65,000 - 15,000 - 40,000 - 10,000 = 35,000
Therefore, the correct answer is C) 35,000 units.
Equivalent units of production = Units transferred to the next department or to finished goods + Equivalent units in ending work in process inventory
47,500 = Units transferred to the next department or to finished goods + 10,000 × 75%
Units transferred to the next department or to finished goods = 47,500 ? 10,000 × 75% = 40,000
Units in beginning work in process inventory + Units started into production or transferred in = Units in ending work in process inventory + Units completed and transferred out
15,000 + Units started into production or transferred in = 10,000 + 40,000
Units started into production or transferred in = 10,000 + 40,000 - 15,000 = 35,000
Learning Objectives
- Acquire knowledge on the topic of equivalent units in the context of process costing.
- Determine the equivalent units for materials and conversion costs employing the weighted-average method.
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