Question

Using process costs for decision making 

The costs of materials consumed in producing good units in the Forming Department of Thomas Company were $76,000 and 577, 350 for September and October, respectively.

The number of equivalent units Produced in September and October was 800 tons and 850 tons, respectively. Evaluate the change in the cost of materials between the two months.

Answer 1

Calculation of Cost of material per equivalent Unit during September and October

Material cost per equivalent

For September = $76000/800 =$95

For October = $77350/850 = $91

Evaluation

From the data given we found that  there is increase in equivalent units produced from 800 tons in September to 850 tons in October but from the above calculation  it is clear that per unit cost of material consumed during two month is not same and there is reduction in cost per unit in October  it has reduced to $91 per ton in October from $95 per ton in September this is may be due to efficient utilization of material or reduction in cost of material acquired for consumption in process

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