Question

(TCO 3) James Company uses process costing to track its costs in two sequential production departments: Forming and Finishing. The following information is provided regarding the Forming Department:

Forming Department
Month Ended July 31

Unit information
Beginning work in process, July 1 --- 6,000
Started into production during July --- 18,000
Completed and transferred to Finished Department during July --- 16,000
Ending work in process, July 31 (30% complete as to direct materials and 40% complete as to conversion costs) --- 8,000

Cost information:
Beginning work in process as of July 1 (consists of $5,000 of direct materials costs and $9,500 of conversion costs) --- $14,500
Direct materials used in July --- $27,936
Conversion costs incurred in July --- $34,350  

Required:
(a) Calculate the equivalent units for direct materials. (Show your work)
(b) Calculate the cost per equivalent unit for direct materials. (Show your work)

Answer 1

Calculate equivalent unit for direct materials :

Equivalent unit for direct material = Unit completed & transferred out+Ending work in process*percent completion

= 16000+(8000*30%)

Equivalent unit for direct materials = 18400 units

(b) Calculate the cost per equivalent unit for direct materials.

Cost per equivalent unit for direct materials = Total cost of material/equivalent unit of direct material

= (5000+27936)/18400

Cost per equivalent unit for direct material = 1.79 per equivalent unit