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Victory Company uses weighted-average process costing to account
for its production costs. Conversion cost is added evenly
throughout the process. Direct materials are added at the beginning
of the process. During November, the company transferred 790,000
units of product to finished goods. At the end of November, the
work in process inventory consists of 180,000 units that are 70%
complete with respect to conversion. Beginning inventory had
$252,200 of direct materials and $137,400 of conversion cost. The
direct material cost added in November is $1,687,800, and the
conversion cost added is $2,610,600. Beginning work in process
consisted of 78,000 units that were 100% complete with respect to
direct materials and 80% complete with respect to conversion. Of
the units completed, 78,000 were from beginning work in process and
712,000 units were started and completed during the period.
2. Compute both the direct material cost and
the conversion cost per equivalent unit.
|
2)
Cost per equivalent unit of production | Materials | Conversion | |||
Cost of beginning work in process | $252,200 | $137,400 | |||
Cost incurred this period | $1,687,800 | $2,610,600 | |||
Total costs | Costs | $1,940,000 | Costs | $2,748,000 | |
÷ equivalent units of production (note 1) | EUP | 970,000 | EUP | 916,000 | |
Cost per equivalent unit of production | $2 ($1,940,000/970,000) | $3 ($2,748,000/916,000) | |||
Note:-
1)
Equivalent units of production | Direct Materials | Conversion |
Units completed and transfered out | 790,000 | 790,000 |
Unit of ending work in process | ||
Direct Materials (180,000 ×100%) | 180,000 | |
Conversion (180,000 × 70%) | 126,000 | |
Equivalent units of production | 970,000 | 916,000 |
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