Question

Give an example for calculating Cost per equivalent unit.

Answer 1

Kyler Industries started a new batch of paint on October 1. The new batch consists of 8,700 cans of paint, of which 7,500 was completed and transferred to finished goods. During October, the manufacturing process recorded the following expenses: direct materials of $10,353; direct labor of $17,970; and applied overhead of $9,000. The inventory still in process is 100% complete with respect to materials and 30% complete with respect to conversion. What is the cost of inventory transferred out and work in process? Assume that there is no beginning work in process inventory.

Solution

Units Units to account for Beginning work in process Units started into production Total units to be account for 8,700 8,700 Materials 100% Total Conversion 30% Work in process completion % Units accounted for Completed and transferred out Ending work in process Total units to account for 7,500 1,200 8,700 7,500 360 7,500 1,200 8,700 7,860 Materials Conversion Total Costs to account for Beginning work in process Incurred during the period Total costs to account for Equivalent units Cost per equivalent unit $37,323 $37,323 $10,353 $10,353 8,700 $ 1.19 $26,970 $26,970 7,860 $ 3.43 $ 4.62