Question

Iron Inc. manufactures paint in a highly automated process. Its costing system uses two cost categories: direct materials and conversion costs. Each batch of product must pass through the Mixing Department and the Testing Department. Direct materials are all added at the beginning of the production process, and conversion costs are incurred evenly throughout production. Forge uses the weighted-average method for costing. Data for the Mixing Department for September Work in process, beginning inventory: 600 units Conversion costs: 50% complete Units started during September: 1,700 units Work in process, ending inventory: 400 units Conversion costs: 75% complete Costs for September Cost of work in process, beginning, direct materials: $438,000 Conversion costs: $780,000 Costs added in September Direct materials: $2,210,000 Conversion costs: $2,210,000 Required: 1. What is the direct materials cost per equivalent unit for September? (Round your answer to 3 decimal places.) Equivalent unit for direct materials 2. What are the equivalent units of production for conversion during September? Equivalent units for conversion units

Answer 1

Solution 1:

Units completed = 600+1700-400 = 1900 units

Equivalent units for Direct materials = Units Completed*100% + Units in Ending Work in process*100%

= 1900*100% + 400*100% = 2300 units

Direct Materials Cost per Equivalent unit = ($438000 + $2210000) / 2300 = $1151.304

Solution 2:

Equivalent Units for Conversion = Units Completed*100% + Units in Ending Work in process*75%

= 1900*100% + 400*75% = 2200 units