Reutter Company manufactures a single product and uses process costing. The company’s product goes through two processing departments, Etching and Wiring. The following activity was recorded in the Etching Department during July:
Materials are added at several stages during the etching process. The company uses the FIFO method.
Required:
1. Determine the equivalent units for July for the Etching Department.
2. Compute the costs per equivalent unit for July for the Etching Department.
3. Determine the total cost of ending work in process inventory and the total cost of units transferred to the next process for the Etching Department in July.
To determine the equivalent units for the Etching Department in July, you need to calculate the number of units that are completed and partially completed during the period. Here's how you can do it:
1. Determine the units started and completed during July:
- Look at the number of units that were completed and transferred out of the Etching Department during July. This information should be provided in the problem statement.
- This represents the number of units that have undergone all the processing in the Etching Department and are ready to be transferred to the next department.
2. Determine the equivalent units for units in ending work in process (EWIP) inventory as of the end of July:
- Look at the number of partially completed units in the EWIP inventory as of the end of July. This information should be provided in the problem statement.
- Calculate the percentage of completion for each partially completed unit in the EWIP inventory.
- Multiply the number of partially completed units by their respective percentage of completion to get the equivalent units.
3. Calculate the total equivalent units for July:
- Add the units started and completed during July (step 1) to the equivalent units in the EWIP inventory (step 2).
- This will give you the total equivalent units for the Etching Department in July.
Next, let's move on to calculating the costs per equivalent unit for the Etching Department in July. Here's how you can do it:
1. Determine the total cost incurred in the Etching Department during July:
- Look at the total cost incurred in the Etching Department during July. This information should be provided in the problem statement.
2. Determine the total equivalent units for July (calculated in the previous step).
3. Calculate the cost per equivalent unit:
- Divide the total cost incurred in the Etching Department during July by the total equivalent units for July.
- This will give you the cost per equivalent unit for the Etching Department in July.
Finally, we can calculate the total cost of ending work in process inventory and the total cost of units transferred to the next process for the Etching Department in July. Here's how you can do it:
1. Multiply the equivalent units in the EWIP inventory (calculated earlier) by the cost per equivalent unit (calculated in the previous step).
- This will give you the total cost of the ending work in process inventory for the Etching Department in July.
2. Multiply the units started and completed during July by the cost per equivalent unit (calculated in the previous step).
- This will give you the total cost of units transferred to the next process for the Etching Department in July.
By following these steps, you should be able to determine the equivalent units, costs per equivalent unit, total cost of ending work in process inventory, and total cost of units transferred to the next process for the Etching Department in July.