Jolly Company Uses The Weighted Average Method In Its Proces

Jolly Company Uses The Weighted Average Method In Its Process Costing

Jolly Company uses the weighted-average method in its process costing system. Operating data for the Painting Department for the month of April are provided as follows: beginning work in process inventory of 4,700 units at 90% complete, units transferred in from the prior department during April totaling 59,700 units, and ending work in process inventory of 7,300 units at 80% complete. The assignment requires calculating the equivalent units for conversion costs in the Painting Department for April.

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The task involves computing the equivalent units for conversion costs in a process costing system using the weighted-average method, based on given inventory and production data. This calculation is essential for determining the cost per unit under process costing, which combines beginning inventory costs with costs incurred during the period.

The first step is to understand the basic concept of equivalent units in process costing. Equivalent units represent the number of complete units that could have been produced given the amount of work actually performed during the period. Here, we focus on conversion costs—costs related to labor and manufacturing overhead—and how they apply to units in beginning inventory, units transferred in, and ending inventory.

Using the weighted-average method, the calculation combines costs from the beginning inventory and costs incurred during the current period, without regard to the units' prior costs. The equivalent units of production for conversion costs are calculated by summing:

- Units transferred out (including the units that are partially complete),

- Equivalent units in ending work in process (WIP) inventory.

The formula for equivalent units for conversion costs in the weighted-average method is:

Equivalent units = Units transferred out + (Ending WIP units × % complete with respect to conversion).

Units transferred out are calculated as the sum of the units completed during the period, which includes the units in beginning inventory, the units started and completed, minus the units in ending inventory.

Given data:

- Beginning WIP inventory: 4,700 units at 90% complete.

- Units transferred in during April: 59,700 units.

- Ending WIP inventory: 7,300 units at 80% complete.

We need to determine the units transferred out, which is the total units started and completed minus ending inventory. Under the weighted-average method, the number of units transferred out is:

Units transferred out = Units started + beginning inventory units – ending inventory units.

Since the total units include beginning inventory and units transferred in, and the units in ending inventory are known, the units transferred out can be calculated directly as:

Units transferred out = Beginning inventory + Units transferred in – Ending inventory = 4,700 + 59,700 – 7,300 = 57,100 units.

Next, compute the equivalent units of conversion costs:

- The units transferred out are fully complete, so they count as 57,100 equivalent units.

- The ending WIP inventory units are 7,300, at 80% completion:

Equivalent units in ending WIP = 7,300 × 80% = 5,840.

Finally, the total equivalent units for conversion costs are:

Equivalent units = Units transferred out + Equivalent units in ending WIP = 57,100 + 5,840 = 62,940.

Therefore, the correct answer is:

A) 62,940.

This calculation aligns with standard process costing principles and the weighted-average method, ensuring an accurate measure of work and costs associated with production in April.

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