Problem:
Debrozzo Shipping, Inc. is contemplating the use of process costing to track the costs of its operations. The operation consists of three segments (departments): receiving, shipping, and delivery. Containers are received at Debrozzo's docks and sorted according to the ship they will be carried on. The containers are loaded onto a ship, which carries them to the appropriate port of destination. The containers are then off-loaded and delivered to the receiving company.
Debrozzo Shipping wants to begin using process costing in the shipping department. Direct materials represent the fuel costs to run the ship, and "Containers in transit" represents work in process. Listed below is information about the shipping department's first month's activity.
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Containers in transit, April 1
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0
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Containers loaded
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800
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Containers in transit, April 30
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350
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40% of direct materials and
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30% of conversion costs
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Instructions
(a) Determine the physical flow of containers for the month.
(b) Calculate the equivalent units for direct materials and conversion costs.