Question

Materials are added at the beginning of the process. Direct labor and overhead are incurred evenly throughout the process.

October 1, Inventory (25% complete for direct | 8,700 units (direct materials-$61,500) . labor and overhead) (direct labor and factory overhead $43,200) October 31, Inventory (70% complete for | 11,200 . direct labor and overhead) Units started during October October production costs 34,500 $301,380. $498,624 Direct materials Direct labor and factory overhead

(1) Calculate equivalent units of production (4 marks);

(2) Calculate cost per EUP; (round to two decimals) (4 marks)

(3) What is the cost of all units that were completed and transferred to finished goods in October? And what is the total cost of ending goods in process? (Round to whole dollar amount) (4 marks)

Answer 1

Ans. (1) Calculate Equivalent Units of Production (EUP);

	No; of Units	% of Direct Materials	EUP – Direct Materials	% of Direct Labour & Factory overhead	EUP- Direct Labour & Factory overhead
Units completed and transferred out (see working note)	25800	100%	25800	100%	25800
Units in the Ending of October (given)	11200	100%	11200	70%	7840
Equivalent Units of Production	37000 Units		37000 units		33640 Units

Note: Percentage for unit completed and transferred out of Direct Materials and Direct Labour & Factory overhead are will be 100% complete.

………………………………………………………………………………………………………………………………………………………………

Ans. (2) Calculate cost per Equivalent Units of Production (EUP);

	Direct Materials	Direct Labour & Factory overhead
Cost of Units in the beginning of October (given)	$61,500	$43,200
Production cost in October (given)	$301,380	$498,624
Total cost (a)	$362,880	$541,824
Equivalent Units of Production (b)	37000 units	33640 Units
Cost per Equivalent Units of Production (a)/(b)	$9.81 per unit	$16.11 per unit

…………………………………………………………………………………………………………………………………………………………………….

Ans. (3) What is the cost of all units that were completed and transferred to finished goods in October? And what is the total cost of ending goods in process?

i) Cost of units completed and transferred to finished goods

	Equivalent Units of Production (a)	Cost per Equivalent Units of Production (b)	Total Cost of Equivalent Units of Production (a) *(b)
Direct Materials	25800 Units	$9.81	$253,098
Direct Labour & Factory overhead	25800 Units	$16.11	$415,638
Total Cost of units completed and transferred out			$668,736

ii) Total cost of ending goods in process

	Equivalent Units of Production (a)	Cost per Equivalent Units of Production (b)	Total Cost of Equivalent Units of Production (a) *(b)
Direct Materials	11200 Units	$9.81	$109,872
Direct Labour & Factory overhead	7840 Units	$16.11	$126,302
Total cost of ending goods in process			$236,174

Working Notes

1.Summary of Production Flow of units

Units in the beginning of October (given)	8700
Less: Units started during October (given)	34500
Units completed and transferred out	25800
Units in the Ending of October (given)	11200