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 weighted-average method.
a Pacifik Ink beginning work in process inventory is 61,000 units.
Units transferred out of Pacifik Ink is 128,000 units.
Pacifik Ink units in ending work in process is 43,000 units.
Pacifik Ink units started
= (43,000 + 128,000) - 61,000 = 110,000 units
Pacifik Ink equivalent unit of direct material
= 128,000 + (43,000 × 80%) = 162,400 units
Equivalent units of Conversion cost of Pacifik Ink
= 128,000 + (43,000 × 40%) = 145,200 units
Pacifik Ink equivalent units in conversion cost is 145,200 and in direct material 162,400 units
b Conversion Cost per equivalent unit of Pacifik Ink
= (582,460 + 4,022,730) / 145,200 = $31.71
Pacifik Ink cost per equivalent unit of Direct material
= (423,500 + 3,314,300) / 162,400 = $23.01
Pacifik Ink cost per equivalent unit under weighted average method in direct material $31.71 and in conversion cost $23.01
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