# PracticeExamIIAnswerSheetACC221 - How to calculate...

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How to calculate equivalent units Units transferred from next dept + (Inventory ending for materials or conversion) Adding the units transferred out to the equivalent units from ending inventory Journal Entry for direct labor Debit WIP for each dept and credit salary and wages payable Calculating cost per equivalent unit WIP beginning + Cost added in Department = Total Cost Total cost /equivalent units = cost per equivalent unit Ex: 20,000 units (.10%) = (7,000(beg, cost) + \$244,600(cost added) = ( total cost) Equivalent units = units transferred + WIP ending, conversion Cost per equivalent unit = total cost/ equivalent unit = 244, 600/74,000 = 3.305 Calculating units transferred: Units transferred = Beg, inv + additional units - end, inv 20,000 +63000 – 10,000 = 73,000 + 1,000 (end, inv conversion) = 74,000 Equivalent units = 74,000 Total cost /Equivalent units 4. Calculate equivalent unit 1. first calculate units transferred 5,000 + 81,000 -18,000 = 68,000 = units transferred 2. calculate WIp, ending conversion 80% 18,000 * .80 = 14,400 3. Add units transferred and WIP ending conversion Equivalent units = 68,000 +14,400 = 82,400 (B) 5. How much conversion cost was assigned to the units transferred out of the Fitting Dept.? Units transferred = 1,100 + 46,000 – 4,600 = 42,500 Cost per conversion = \$9.24

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42,500 * \$9.24 = \$392,700 (D) 6. Units transferred = 78,000+ 254,000 – 21,000 = 311,000 (B) 7. Calculate total cost of units completed and transferred out 50,000 *\$1.50 = 75,000 50,000 * \$3.20 = 160,000 Total cost of units completed & transferred out = 160,000 +75,000 = 235,000 (A) 8. Activity level increase effect on mixed cost in total and per unit Mixed cost – a cost that contains both variable and fixed elements Y = a +bX Increase in activity = In total (increase) & per unit ( decrease) 9. Activily level decreases within relevant range Affect on fixed cost/per unit = increases Affect on Variable cost/per unit = no change Affect on fixed cost/ total = no change Affect on variable cost/ total = decreases (B) 10. Discretionary fixed costs – usually arise from annual decisions by management to spend in certain fixed costs areas. Often called managed fixed costs Can be adjusted from year to year. Ex: advertising, research, public relations, management development programs, and internships
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