Class Example $-$ Chemco

Chemco produces Chemical $x$ which is an industrial cleaner. In the production process, several raw materials are mixed in a large vat then pressured heated to create Chemical X$.$ The direct materials are added at the beginning of production while conversion efforts occur uniformly throughout production.

On May $1,$ beginning inventories were zero for direct materials and finished goods. For May, beginning work$-$in$-$process consisted of $5,000$ units. The costs assigned to units in beginning work$-$in$-$process were:

$$4,000$ direct materials

$2,{500}_{?}$ conversion costs $($direct labor and manufacturing overhead$)$

$$6,{500}_{?}$ total

During May, the company plant started production on $25,000$ units. The plant finished $26,000$ units during the month. Costs incurred at the plant during May:

$$22,280$ direct materials purchased $($cash payment$)$ and used in production $22,{892}_{?}$ conversion costs $($ $$12,$$$92$ direct labor; $$10,000$ overhead; cash$)$ $$45,{172}_{?}$ total

Ending work$-$in$-$process consisted of $4,000$ units that were $40\%$ complete as to conversion costs. During May the company sold $20,000$ units at $$3$ per unit. For the month, salaries of marketing personnel were $$5,000.$

Required

$(1)$ Assume the company uses process costing. Determine the cost per equivalent unit for: $($a$)$ Direct materials; $($b$)$ Conversion costs

$(2)$ Provide the journal entries for: units completed during May; units sold.

$(3)$ Provide GAAP income statement for May