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EQUIVALENT PRODUCTION: SPOILED UNITS, ADDITIONAL DIRECT MATERIALS Poole, Inc., produces a chemical compound by a unique chemical process which Poole has divided into two departments,
EQUIVALENT PRODUCTION: SPOILED UNITS, ADDITIONAL DIRECT MATERIALS Poole, Inc., produces a chemical compound by a unique chemical process which Poole has divided into two departments, A and B, for accounting purposes. The process functions are as follows: The formula for the chemical compound requires 1 pound of chemical X and 1 pound of chemical Y. In the simplest sense, 1 pound of chemical X is processed in Department A and transferred for further processing to Department B, where 1 pound of chemical Y is added when the process is complete. The finished chemical compound is then transferred to finished goods inventory. The process is continuous, operating 24 hours a day. Normal spoilage occurs in Department A. Five percent of chemical X is spoiled in the first few seconds of processing. The company's policy is to treat the cost of spoiled units in production as a separate element of cost in the department in which the spoilage occurs. No spoilage occurs in Department B. In Department A. conversion costs are incurred uniformly throughout the process. In Department B, conversion costs are allocated equally to each equivalent pound of output Poole's unit of measure for work-in-process and finished goods inventories is pounds. The following data are available for the month of October DEPARTMENT A DEPARTMENT B Work-in-process inventory, October 1 8,000 lb 10,000 lb Stage of completion of beginning inventory (one batch per department) 2 10 Started or transferred in 50,000 lb 2 Transferred out 46,500 lb ? Work-in-process inventory, October 31 ? ? Stage of completion of ending inventory Total equivalent pounds of direct material added in Department B 44,500 lb Required: a Complete the above schedule. b Prepare Equivalent Production schedules for Department A and Department B for Oc. tober under fifo. (AICPA adapted)
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