Question

Pacific Ink had beginning work-in-process inventory of $1,005,960 on October 1. Of this amount, $423,500 was the cost of direct materials and $582,460 was the cost of conversion. The 61,000 units in the beginning inventory were 30 percent complete with respect to both direct materials and conversion costs.

During October, 128,000 units were transferred out and 43,000 remained in ending inventory. The units in ending inventory were 80 percent complete with respect to direct materials and 40 percent complete with respect to conversion costs. Costs incurred during the period amounted to $3,314,300 for direct materials and $4,022,730 for conversion.

Required:

a. Compute the equivalent units for the materials and conversion cost calculations.

b. Compute the cost per equivalent unit for direct materials and for conversion costs using the FIFO method.

Answer 1

a) Equivalent unit:

		Whole unit	%material	EUP Material	%conversion	EUP Conversion
1	Beginning WIP	61000	70%	42700	70%	42700
2	Unit started and completed(128000-610000)	67000	100%	67000	100%	67000
3	Ending WIP	43000	80%	34400	40%	17200
4	Equivalent unit(1+2+3)	171000		144100		126900

b) cost per equivalent unit:

		Material	conversion
1	cost added	3314300	4022730
2	equivalent unit	144100	126900
3	cost per equivalent unit	23	31.70