These are notes that are going to help the questions that I am having trouble with. Our topic is equivalent units (EUs) of production. Let's look at some illustrative problems.

1) Assume beginning work in process (WIP) is zero. 6000 units were finished during the month. Ending work in process is 4000 units, 60% complete. All materials are added at the beginning of the production process; conversion costs are evenly applied To compute equivalent units for conversion costs, complete the following steps: a) 4000 units x .60 = 2400 equivalent units in ending WIP: if the ending is 60% complete, it indicates that 60% of the units will be completed in the current month and 40% will be completed next month - we are only interested in the current month.

b) Add Zero (beginning WIP) + 6000 (units finished) + 2400 (EUs for ending WIP) = 8400 EUs The 8400 represents the total equivalent units of production for conversion costs for the current month To complete equivalent units for materials, complete the following steps:

c) All 4000 units in ending WIP will be included in the computation, since all materials are added at the start of the process

d) Add Zero (beginning WIP) + 6000 (units finished) + 4000 (EUs for ending WIP) = 10,000 EUs The 10,000 represents the total equivalent units of production for materials for the current month

2) Refer to # 1. Assume that all materials are added to production at the end of the process. Conversion costs are evenly applied. To compute equivalent units for conversion costs: Since conversion costs are evenly applied, we obtain the same answer as in 1b: 8400 EUs To compute equivalent units for materials: The EUs for the ending WIP will be zero: Since all materials are added at end of process, you must consider that the ending WIP is started in the current month and finished in the following month - the materials will be added at the finish - next month. Remember, we are concerned with the current month. Add the following: Zero (Beginning WIP) + 6000 (finished) + Zero (Ending WIP) = 6000 EUs - this represents the equivalent units of production for materials for the current month

3) Assume beginning WIP is 10,000 units, 80% complete. 35,000 units were finished. Ending WIP is 5000 units 10% complete. All materials are added at the beginning of the process. Conversion costs are evenly applied. To compute EUs for conversion costs:

a) Beginning WIP: 10,000 x .20 = 2000 EUs Here is the logic; the beginning inventory for the current month was the ending inventory for the previous month - this is true for any firm that maintains inventory. If the beginning WIP is 80% complete, it indicates that 80% was completed last month; therefore, 20% will be completed in the current month

b) Finished: 35,000 - 10,000 = 25,000 units You have to subtract the 10,000 units from the beginning inventory - we are only interested in units finished in the current month. Remember, the beginning inventory is carried over from last month

c) Ending WIP: 5000 x .10 = 500 Here is the logic: for the ending inventory, 10% will be completed in the current month and 90% will be completed in the following month

d) Add: 2000 (Beginning WIP) + 25,000(Finished) + 500 (Ending WIP) = 27,500 EUs , which represents equivalent units of production for the current month. To compute EUs for materials:

e) Beginning WIP = Zero Here is the logic: since all materials are added at the beginning of the process, and the beginning WIP was started last month, all materials were added last month - therefore, no materials are added in the current month

f) Finished: 35,000 - 10,000 (beginning WIP) = 25,000 units g) We include all 5000 units from ending WIP, since ending inventory is started in current month and all materials are added at beginning of process h) Add: Zero + 25,000 + 5000 = 30,000 EUs, which represents total EUs of production for current month

4) Refer to #3. Assume that all materials enter production at the end of the process. Conversion costs are evenly applied To compute conversion costs: Since conversion costs are evenly applied, we obtain the same answer that we found in #3: 27,500 EUs To compute material costs:

a) Beginning WIP: Since all materials are added at the end of the process, we include all 10,000 units. Remember, the beginning inventory was started last month and finished in the current month

b) Finished: 35,000 units - 10,000 units (from beginning inventory) = 25,000 units

c) Ending WIP = Zero: Since all materials are added at end of process, we must remember that the ending inventory is started in the current month and finished in the following month all materials will be added next month d) Add: 10,000 + 25,000 + Zero = 35,000, which represents total EUs of production for the current month

5) Beginning WIP is 10,000 units, 40% complete. 40,000 units were finished. Ending WIP is 4000 units, 25% complete. 35% of materials are added at the beginning of the process; 65% of materials are added at mid-point. Conversion costs are evenly applied. To compute conversion costs:

a) Beginning WIP: 10,000 x .60 = 6000 EUs Since the beginning WIP is 40% complete, it indicates that 40% was completed in the previous month; 60% will be computed in the current month

b) Finished: 40,000 - 10,000 (from beginning WIP) = 30,000 units

c) Ending WIP: 4000 x .25 = 1000 EUs Remember, the ending WIP is started in the current month and finished next month. 25% will be completed this month and the remaining 75% will be completed next month. d) Add: 6000 + 30,000 + 1000 = 37,000 EUs, which is your total equivalent units for conversion costs for current month To compute EUs for materials: Beginning WIP: 10,000 units x .65 = 6500 EUs for materials. Remember, the beginning inventory for the current month was the ending inventory for the previous month. In the previous month, 35% of materials were added. The mid-point (the 50% level is reached in the current month - we reached the 40% level last month. At the mid-point, 65% of materials are added - this is why I multiplied by 65%. Finished: 40,000 -10,000 (from beginning inventory) = 30,000 units Ending WIP: 4000 x .35 = 1400 EUs Remember, the ending inventory for the current month will be the beginning inventory for next month - this is true for ant firm that maintains inventory. The ending inventory is started in the current month and will be finished next month. Since the ending WIP is started this month and 35% of materials are added at the start of the process, I multiplied by .35%. the remaining 65% of materials will be added next month, due to the fact that the 50% level will not be reached until next month. To obtain the total EUs for materials for the month, add: 6500 + 30,000 + 1400 = 37,900 EUs

The Assignment: For each of the following questions, compute equivalent units of production for both materials and conversion costs: (does this help or is more needed)

1) Beginning Work in Process, Zero; Finished, 3000 units; Ending Work in Process, 2000 units, 75% complete. All materials enter production at the beginning of the process. Conversion costs are evenly applied.

2) Refer to #1. Assume that all materials enter production at the end of the process.

3) Beginning Work in Process, 2000 units, 60% complete; finished, 39,000 units; Ending Work in Process, 6000 units, 25% complete. All materials enter production at the beginning of the process. Conversion costs are evenly applied.

4) Refer to #3. Assume that all materials enter production at the end of the process.

5) Beginning Work in Process, 1000 units (50% complete) and 8000 units (25% complete); finished, 29,000 units; Ending Work in Process, 5000 units (25% complete) and 6000 units (50% complete). All materials enter production at the beginning of the process. Conversion costs are evenly applied.

6) Refer to #5. Assume that all materials enter production at the end of the process.

7) Beginning Work in Progress, 9000 units, 20% complete; finished, 29,000 units; Ending Work in Progress, 10,000 units, 55% complete. 75% of materials go into production at the beginning of the process; 25% of materials go into production at mid-point, Conversion costs are evenly applied.