Ethan is the owner of Refresher Corp., a factory that produces white paint that is sold to hardware stores in 1-gallon containers. Their paint has been called revolutionary in that it produces almost no fumes and is very environmental friendly. Ethan would like to continue expanding his operation but knows that Refresher will have to make some decisions about his accounting and the Process Costing procedures they use. His accountant, Arthur, would like to generate some figures for Ethan to review before a decision is made. Arthur has compiled the following information:
Beginning Work-in-Progress (WIP) Inventory, 9,850 gallons; Direct Materials (DM), 100% Complete; and Conversion Costs, 30% complete
Started: 85,600 gallons
Completed: 73,422 gallons
Ending WIP Inventory: Direct Materials, 100% Complete; and Conversion Costs, 82% complete
Refresher adds Conversion Costs evenly throughout the process. Arthur has also pulled together the following cost information from the most recent year:
Beginning WIP Inventory: Direct Materials, $3,456; and Conversion Costs, $5,997
Costs added during the period: Direct Materials, $42,677; and Conversion Costs, $56,980
Ethan knows that Arthur also provided solid guidance in the past and would like to see how each method of Process Costing turns out with respect to their operations. Taking all of this information into consideration, please answer the following questions.
(Round units to whole number and cost to two decimal places.)
a. What are the equivalent units for both Direct Materials and Conversion Costs under the First-In, First-Out (FIFO) method?
b. What is the cost per equivalent unit for both Direct Materials and Conversion Costs under the FIFO method?
c. What are the equivalent units for both Direct Materials and Conversion Costs under the Weighted-Average method?
d. What is the cost per equivalent unit for both Direct Materials and Conversion Costs under the Weighted-Average method?
e. Why do the two methods, FIFO and Weighted-Average, produce different results? Which method would be the appropriate selection for the company? Please make sure to include as many specifics as possible in your response.

Question

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The Answer of Ethan is the owner of Refresher Corp., a factory that produces white paint that is sold to hardware stores in 1-gallon containers. Their paint has been called revolutionary in that it produces almost no fumes and is very environmental friendly. Ethan would like to continue expanding his operation but knows that Refresher will have to make some decisions about his accounting and the Process Costing procedures they use. His accountant, Arthur, would like to generate some figures for Ethan to review before a decision is made. Arthur has compiled the following information:
Beginning Work-in-Progress (WIP) Inventory, 9,850 gallons; Direct Materials (DM), 100% Complete; and Conversion Costs, 30% complete
Started: 85,600 gallons
Completed: 73,422 gallons
Ending WIP Inventory: Direct Materials, 100% Complete; and Conversion Costs, 82% complete
Refresher adds Conversion Costs evenly throughout the process. Arthur has also pulled together the following cost information from the most recent year:
Beginning WIP Inventory: Direct Materials, $3,456; and Conversion Costs, $5,997
Costs added during the period: Direct Materials, $42,677; and Conversion Costs, $56,980
Ethan knows that Arthur also provided solid guidance in the past and would like to see how each method of Process Costing turns out with respect to their operations. Taking all of this information into consideration, please answer the following questions.
(Round units to whole number and cost to two decimal places.)
a. What are the equivalent units for both Direct Materials and Conversion Costs under the First-In, First-Out (FIFO) method?
b. What is the cost per equivalent unit for both Direct Materials and Conversion Costs under the FIFO method?
c. What are the equivalent units for both Direct Materials and Conversion Costs under the Weighted-Average method?
d. What is the cost per equivalent unit for both Direct Materials and Conversion Costs under the Weighted-Average method?
e. Why do the two methods, FIFO and Weighted-Average, produce different results? Which method would be the appropriate selection for the company? Please make sure to include as many specifics as possible in your response.

Ethan Is the Owner of Refresher Corp