Question

The Cutting Department of Sanderson Company has the following production and cost data for July Production Costs Transferred out 15,000 units Beginning work in process Materials S-0- 70,000 21,600 Labor 2. Ending work in process, 5,000 units that are 60% complete as to conversion costs and 100% complete as to materials at July 31. Manufacturing overhead 25,200 Materials are entered at the beginning of the process. Conversion costs are incurred uniformly during the process. Instructions lal Determine the equivalent units of production for (1) materials and (2) conversion costs (b) Compute unit costs and prepare a cost reconciliation schedule.

Answer 1

Ans. a) Calculation of Equivalent units of production

i) Calculation of equivalent unit of production for direct material

Completed unit transferred out                       =    15000

Ending work in process 5000X100%              =     5000

Total equivalent unit of production for matrial   =    20000

ii) Calculation of equivalent unit of production for Conversion cost

Completed unit transferred out                       =    15000

Ending work in process 5000X160%              =        3000

Total equivalent unit of production for matrial   =     18000

b) Calculation of Unit cost

                                                Materail              Labour    Overhead                Total

Incurred during the year              70000 12960    15120                  98080

Equivalent unit 20000    18000    18000                      -

Per unit equivalent cost               3.5                    0.72                 0.84

Total unit cost per unit   = 3.5+.72+.84 = 5.09

                                                     Cost Reconciliation statement

Direct material statement                      =    70000

Labour (21600X.60)                               =    12960

Overhead (25200X.60)                           =     15120

Total cost accounted during the year      =      98080