LDR Manufacturing produces a pesticide chemical and uses process costing. There are three processing departments-Mixing, Refining, and Packaging. On January 1, 2014, the first department, Mixing, had no beginning inventory. During January, 40,000 fl. oz. of chemicals were started in production. Of these, 32,000 fl. oz. were completed and 8,000 fl. oz. remained in process. In the Mixing Department, all direct materials are added at the beginning of the production process and conversion costs are applied evenly through the process. At the end of the month, LDR calculated equivalent units. The ending inventory in the Mixing Department was 60% complete with respect to conversion costs. With respect to conversion costs, how many equivalent units were calculated for the product that was completed and for ending inventory?

Question

Quizplus · Accepted Answer

To calculate equivalent units, we need to consider both units of direct materials and conversion costs. In the Mixing Department, all direct materials are added at the beginning of the production process, so we don't need to worry about direct materials when calculating equivalent units for the Mixing Department.

For conversion costs, we need to consider both the units that are completed and transferred to the next department and the units that are still in process (i.e., ending inventory). To calculate the equivalent units for each, we need to use the percentage of completion for ending inventory.

Units completed = 32,000 equivalent units (all conversion costs are 100% complete)

Units in ending inventory = 8,000 fl. oz. x 60% completion = 4,800 equivalent units

So the correct answer is A: Product completed: 32,000 equivalent units; Products in ending inventory: 4,800 equivalent units.

LDR Manufacturing Produces a Pesticide Chemical and Uses Process Costing