Question

Pablo Company calculates the cost for an equivalent unit of production using costing.

Data For June

Work in process inventory, June 1: 30,000 units

Direct materials: 100% complete 60,000

Conversation: 40% complete 25,000

Balance in work process 85,000

Units started during June 70,000

Units completed and transferred out 70,000

Work in process inventory, June 30 30,000

Direct materials: 100% complete

Conservation: 80% complete

Costs incurred during June

Direct materials 122,500

Conversation costs

Direct labor 119,720

Applied overhead 179,580

Total conversation costs 299,300

Compute the costs per equivalent unit for both the weighted- average and FIFO methods

.................................................Weighted Average Cost per EU...............FIFO cost per EU

Direct materials

Conversion

Total cost

  

Answer 1

Equivalent unit : Weighted average method

	Physical Unit	EUP-Direct material	EUP-Conversion
Unit Completed and transferred out	70000	70000	70000
Unit ending work in process	30000	30000	30000*80% = 24000
Equivalent unit of production	100000	100000	94000

Equivalent unit : FIFO method

	Physical Unit	EUP-Direct material	EUP-Conversion
Unit beginning work in process	30000	30000*0% = 0	30000*60% = 18000
Unit started and completed	40000	40000	40000
Unit ending work in process	30000	30000	30000*80% = 24000
Equivalent unit of production	100000	70000	82000

Calculate cost per equivalent unit

	Weighted Average Cost per EU	FIFO cost per EU
Direct material	(60000+122500) = 182500/100000 = 1.825	122500/70000 = 1.75
Conversion	(25000+299300) = 324300/94000 = 3.45	299300/82000 = 3.65
Total Cost	$5.275	$5.40