CleanSweep produces outdoor brooms. On April 30, 2008, the firm had 7,200 units in process that were 60 percent complete as to material, 40 percent complete as to direct labor, and 20 percent complete as to overhead. During May, 374,000 brooms were started. Records indicate that 368,400 units were transferred to Finished Goods Inventory in May. Ending units process were 70 percent complete as to material, 25 percent complete as to direct labor, and 10 percent complete as to overhead Calculate the physical units to account for in May.How many units were started and completed during May? Determine May’s EUP for each category using the weighted average method. Determine May’s EUP for each category using the FIFO method .. Reconcile your answers to part ( c ) and (b)
Please give the step to solve it. Thank you.
To solve this problem, you need to follow several steps:
Step 1: Calculate the physical units to account for in May.
To calculate the physical units to account for in May, you need to add the units in process at the beginning of May and the units started in May.
Beginning units in process (April 30): 7,200 units
Units started in May: 374,000 units
Total units to account for = Beginning units in process + Units started in May
Total units to account for = 7,200 units + 374,000 units = 381,200 units
Step 2: Determine the units started and completed during May.
To determine the units started and completed during May, you need to calculate the difference between the total units to account for and the ending units in process.
Ending units in process: 70% complete as to material, 25% complete as to direct labor, and 10% complete as to overhead.
Material completion percentage: 70% of 371,400 (Ending units process)
= 0.70 * 371,400 = 259,980 units
Direct labor completion percentage: 25% of 371,400 (Ending units process)
= 0.25 * 371,400 = 92,850 units
Overhead completion percentage: 10% of 371,400 (Ending units process)
= 0.10 * 371,400 = 37,140 units
Units completed during May:
= Ending units in process - Units partially completed in each category
= 371,400 units - (259,980 + 92,850 + 37,140)
= 371,400 units - 389,970 = -18,570 units
This negative value indicates that the number of units transferred in May is greater than the number of units in the ending process.
Step 3: Determine May's equivalent units of production (EUP) for each category using the weighted average method.
To determine May's EUP for each category using the weighted average method, you need to calculate the equivalent units of production for material, direct labor, and overhead separately.
The formula for weighted average method of calculating EUP is:
EUP = (Units completed + (Ending units in process * % completion))
Using the information from Step 2, we can calculate the EUP for each category:
Material EUP = (Units completed + (Ending units in process * % completion))
= (-18,570 units + (371,400 units * 70%))
= (-18,570 units + 259,980 units)
= 241,410 units
Direct Labor EUP = (Units completed + (Ending units in process * % completion))
= (-18,570 units + (371,400 units * 25%))
= (-18,570 units + 92,850 units)
= 74,280 units
Overhead EUP = (Units completed + (Ending units in process * % completion))
= (-18,570 units + (371,400 units * 10%))
= (-18,570 units + 37,140 units)
= 18,570 units
Step 4: Determine May's EUP for each category using the FIFO method.
To determine May's EUP for each category using the FIFO method, you need to consider the units transferred out first and then the ending units in process.
Material EUP using FIFO = Units completed + (Ending units in process * % completion)
= 368,400 units + (371,400 units * 70%)
= 368,400 units + 259,980 units
= 628,380 units
Direct Labor EUP using FIFO = Units completed + (Ending units in process * % completion)
= 368,400 units + (371,400 units * 25%)
= 368,400 units + 92,850 units
= 461,250 units
Overhead EUP using FIFO = Units completed + (Ending units in process * % completion)
= 368,400 units + (371,400 units * 10%)
= 368,400 units + 37,140 units
= 405,540 units
Step 5: Reconcile your answers to part (c) and (b).
To reconcile the answers, compare the EUP for each category calculated using the weighted average method (part c) and the FIFO method (part b).
- Material EUP using weighted average method = 241,410 units
- Material EUP using FIFO method = 628,380 units
- Direct Labor EUP using weighted average method = 74,280 units
- Direct Labor EUP using FIFO method = 461,250 units
- Overhead EUP using weighted average method = 18,570 units
- Overhead EUP using FIFO method = 405,540 units
As we can see, there is a difference between the calculations. This is because the weighted average method considers the units partially completed at the beginning and ending of the period, while the FIFO method only considers the units completed and transferred out.