Pitt Enterprises manufactures jeans. All materials are introduced at the beginning of the manufacturing process in the Cutting D
epartment. Conversion costs are incurred uniformly throughout the manufacturing process. As the cutting of material is completed, the pieces are immediately transferred to the Sewing Department. Information for the Cutting Department for the month of May follows. Work in Process, May 1 (50,000 units, 100% complete for direct materials, 40% complete with respect to direct labor and overhead; includes $70,500 of direct material cost; $34,050 of conversion costs).
Units started in May 225,000
Units completed in May 200,000
Work in Process, May 31 (75,000 units, 100% complete for direct materials; 20% complete for conversion costs).
Costs incurred in May
Direct materials $342,000
Conversion costs $352,950
If Pitt Enterprises uses the FIFO method of process costing, compute the equivalent units for materials and conversion costs respectively for May.
The correct answer is (E) 225,000; 195,000. Explanation: The details provided, using the FIFO method, show that the opening balance is 50,000 units costing $70,500, all of which are complete for material. During the month, 225,000 units are processed for a total cost of $342,000, also fully complete for materials. The equivalent units for materials in that timeframe equal 225,000. For conversion costs, the opening balance of 50,000 units is 40% complete, meaning 30,000 units are completed this month, with 150,000 done from newly added 225,000. The remaining 75,000 units are 20% complete, yielding an additional 15,000. Thus, total equivalent units completed during the month is 30,000 + 150,000 + 15,000, leading to 195,000 for conversion.
Total asset turnover indicates the ratio of total assets to total revenue. It evaluates how effectively a company is employing its assets to generate sales.
The calculation is performed as follows: Net Sales / Average Total Assets.
Average total assets are determined by: (Asset at Start + Asset at End) / 2.
Using the given data:
Total revenue = $900,000 and total assets = $2,000,000.
$900,000/$2,000,000 = 0.45.
Note: Since the beginning and ending assets are not specified, we assume $2,000,000 represents the average assets.
