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. Balance Date Item Debit Credit Debit Credit Mar. 12,000 1 Bal., 7,200 units, 2/3 completed 31 Direct materials, 129,600 units 31 Direct labor 31 Factory overhead 31 Goods finished, 131,400 units 31 Bal. ? units, 3/5 completed 168,480 49,860 28,044 180,480 230,340 258,384 249,420 8,964 8,964 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 $ 7,200 $ 129,600 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 भी 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

a.

		Equivalent units
	Physical units	Direct material	Conversion
Beginning inventory	7,200	0	2,400
Started and completed	124,200	124,200	124,200
Units completed and transferred	131,400	124,200	126,600
Ending inventory	5,400	5,400	3,240
Total	136,800	129,600	129,840

	Direct material	Conversion
Cost incurred	$168,480	$77,904
Equivalent units	129,600	129,840
Cost per unit	$1.3	$0.6

a.

Direct material cost per unit $1.3

Conversion cost per unit $0.6

Cost of beginning work in process completed during March = 2,400*$0.6 + 12,000 = $13,440

Cost of units started and completed during March = 124,200 * $1.9 (1.3+0.6) = $235,980

Cost of the ending work in process = 5,400*$1.3 + 3,240*$0.6 = $8,964

b.

Conversion cost per unit for February = $12,000-7,200*$1.3 / 7,200*2/3

Conversion cost per unit for February = $2,640 / 4,800 = $0.55

Conversion cost per unit for March = $0.6

As per above results, Conversion cost per unit increase in March