Question

In its first month of operations (May of 2019), Allred Company’s Department 1 incurred charges of $72,000 for direct material (9,000 units), $38,700 for direct labor, and $13,500 for manufacturing overhead. At month-end, 8,500 units had been finished and transferred out. Those units remaining were finished with respect to material but only 40% finished with respect to conversion

Assuming Allred uses the FIFO method and that materials are added at the beginning of the process and conversion costs are incurred evenly throughout the period, compute the following:

The equivalent units for materials and conversion costs.

The cost per equivalent unit for materials and conversion costs.

The total cost assigned to the units transferred out.

The total cost assigned to the ending inventory.

Prove that your solutions to requirements (c) and (d) sum to the total costs to be accounted for.

Answer 1

Please refer below workings:

DATE I a) calculation of equivalght units for materials & conversion costs: - Input Particulars Output Materials Equivalons Production Cunits) Labor units 9000 completed 8500 100 8 SDO closing wie 500 SDO you 90 200 9000 9,000 9,000 18,700 18,700 overheads % units I units 8500 100 100 8500 100 b. labour particulars Materials costs incurred ($) CA) 22.000 Equivalent units (B) 9,000. cost per Equivalent units 8 38,700 8700 4.45 overhead Total 13,500 124200 8,700 1.55 14 0 The total cost assigned to the units Honsterred out cast for completed units total cost transterred units 14 119,000 -8,500 Labour Eq. cost per cost per d) The total cost assigned to the units in ending inventory Materials Total cost Equivalent venite Egi tq unit 500 8 14000 209 4.45890 200 1.55310 5,200 Overhead cos pei unit fq. unit unit therefore amount in (c) = 119,000 & amount in (d)=5200 194,200 which is total cost accounted. 2020-9-15 12:37