Wilson Company manufactures its product on an assembly line. The firm began production in year 1. During the year, work was begun on 45,000 units. The assembly line has 1,000 “slots,” so at the end of year 1, WIP ending consisted of 1,000 units 50% complete. In year 2 the firm started 50,000 units and ended the year with a full assembly line estimated to be 50% complete. A slowdown occurred during year 3, so the firm started only 25,000 units. Nonetheless, year 3 ended with the assembly line full and the units were estimated to be 50% complete. Direct materials are added at the beginning of the process, and conversion costs are incurred evenly throughout production.
A. Calculate a summary of physical units by determining the beginning WIP, units started, ending inventory, and units completed for each year.
B. Determine the equivalent units for direct materials and conversion costs for each of the
3 years under the weighted average method.
C. Describe the relationship between beginning and ending WIP inventory in years 2 and 3.