Question

Costs per Equivalent Unit

The following information concerns production in the Baking Department for March. All direct materials are placed in process at the beginning of production.

ACCOUNT Work in Process—Baking Department							ACCOUNT NO.
Date		Item	Debit		Credit		Balance
							Debit		Credit
Mar.	1	Bal., 9,000 units, 3/5 completed					15,570
	31	Direct materials, 162,000 units	226,800				242,370
	31	Direct labor	63,060				305,430
	31	Factory overhead	35,472				340,902
	31	Goods finished, 164,100 units			327,930		12,972
	31	Bal. ? units, 4/5 completed					12,972

a. Based on the above data, determine each cost listed below. Round "cost per equivalent unit" answers to the nearest cent.

1. Direct materials cost per equivalent unit	$
2. Conversion cost per equivalent unit	$
3. Cost of the beginning work in process completed during March	$
4. Cost of units started and completed during March	$
5. Cost of the ending work in process	$

b. Assuming that the direct materials cost is the same for February and March, did the conversion cost per equivalent unit increase, decrease, or remain the same in March?

Answer 1

Answer a:

1. Direct materials cost per equivalent unit 2. Conversion cost per equivalent unit 3. Cost of the beginning work in process completed during March. 4.Cost of units started and completed during March. 5. Cost of the ending work in process $1.40 $0.60 $17,730 $310,200 $12,972

Working:

PRODUCTION and COST SUMMARY REPORT - FIFO METHOD Quantity Schedule and Equivalent Units Quantity Percentage Complete: Schedule Materials Conversion Units to be accounted for Work in process, beginning Started into production Beginning: 60% 100% 9,000 Ending: 80% 162,000 100% Total units to be accounted for 171.000 Equivalent Units Units accounted for as follows: Materials Conversion Transferred out From beginning inventory Started and completed this period Work in process, ending 9,000 155,100 0 3,600 155,100 155,100 6,900 6,900 5,520 Total units accounted for 171,000 162,000 164,220 Unit Costs Cost added by the department (a) Equivalent units (b) Unit cost, (a)/(b) 325,332 226,800 98,532 164,220 162,000 2.00 1.40 0.60 Cost Reconciliation Equivalent Units (EU) Costs Cost to be accounted for Work in process, beginning Cost added by the department 15,570 325,332 Total cost to be accounted for 340,902 Cost accounted for as follows: Transferred out: From beginning inventory: Cost in beginning inventory Cost to complete these units: for Materials per EU for Conversion per EU Total cost Units started and completed 15,570 0 3,600 2,160 17,730 310,200 155,100 155,100 Total costs transferred 327,930 Work in process, ending for Materials per EU for Conversion per EU 9,660 6,900 3,312 5,520 Total work in process, ending 12,972 Difference due to rounding cost/unit Total cost accounted for 340,902

Answer b:

Cost of beginning work in progress = $15570

Direct material cost (in beginning work in progress) = 9000 * 1.40 = $12,600

Hence conversion cost per EUP in February = (15570-12600) / (9000 * 60%) = $0.55

In workings in answer a above, we get conversion cost per EUP in March =$0.60

Conversion cost per equivalent unit increases in March by (0.60 - 0.55=) $0.05 per EUP

Hence:

Conversion cost per equivalent unit increases in March