Question

QUESTION 2

1. Zeus Corporation produces cultured diamonds via a secretive process that grows the diamonds in a vacuum chamber filled with a carbon gas cloud. The diamonds are produced in a single continuous process and Zeus uses the weighted-average process costing method of accounting for production.

   The production process requires constant utilization of facilities and equipment, as well as direct labor by skilled technicians. As a result, direct labor and factory overhead are both deemed to be introduced uniformly throughout production.

   Zeus Corporation prepared the following "unit reconciliation" for the month of July:

   Unit Reconciliation:
   	Quantity Schedule
   Beginning Work in Process	5000
   Started into Production	6000
   Total Units into Production	11000	Equivalent Units Calculations:
   			Conversion
   		Direct Materials	Direct Labor	Factory Overhead
   To Finished Goods	8000	8000	8000	8000
   Ending Work in Process	3000	1800	1500	1500
   Total Units Reconciled	11000	9800	9500	9500

   Ending WIP Completion Status:

   Materials = 60% and Conversion = 50%

   The above beginning work in process inventory had an assigned cost of $4,000,000, divided between direct materials (40%), direct labor (30%), and factory overhead (30%).

   Additional costs incurred during July were $9,000,000, divided between direct materials (20%), direct labor (30%), and factory overhead (50%).

   Prepare a schedule showing the calculation of cost per equivalent unit.

   	A.	Costs per equivalent unit $1286.25
   	B.	Costs per equivalent unit $1357.47
   	C.	Costs per equivalent unit $1445.25
   	D.	Costs per equivalent unit $1596.25
   	E.	Costs per equivalent unit $1635.25

Answer 1

Answer

• Correct Answer = Option ‘B’
  Cost per Equivalent unit = $ 1357.47 [$ 346.94 for material + $ 1010.53 conversion]
• Working

EUP - Weighted Average Method	Units	% Material	EUP Materials	% Conversion	EUP - Conversion
Units TRANSFERRED	8,000	100%	8,000	100%	8,000
Units of ENDING WIP	3,000	60%	1,800	50%	1,500
Equivalent Units of Production			9,800		9,500
COST per EUP			Material		Conversion
Cost of Beginning WIP			$    1,600,000.00		$                            2,400,000.00
Cost incurred during the period			$    1,800,000.00		$                            7,200,000.00
Total Costs		Costs	$    3,400,000.00	Costs	$                            9,600,000.00
Equivalent units of production		EUP	9,800	EUP	9,500
Cost per EUP = ANSWER			$         346.93878		$                             1,010.52632