Question

Costs per Equivalent Unit

The following information concerns production in the Baking Department for March. All direct materials are placed in process at the beginning of production.

ACCOUNT Work in Process—Baking Department							ACCOUNT NO.
Date		Item	Debit		Credit		Balance
							Debit		Credit
Mar.	1	Bal., 5,700 units, 3/5 completed					9,291
	31	Direct materials, 102,600 units	133,380				142,671
	31	Direct labor	39,950				182,621
	31	Factory overhead	22,474				205,095
	31	Goods finished, 104,100 units			197,619		7,476
	31	Bal. ? units, 4/5 completed					7,476

a. Based on the above data, determine each cost listed below. Round "cost per equivalent unit" answers to the nearest cent.

1. Direct materials cost per equivalent unit	$
2. Conversion cost per equivalent unit	$
3. Cost of the beginning work in process completed during March	$
4. Cost of units started and completed during March	$
5. Cost of the ending work in process	$

b. Assuming that the direct materials cost is the same for February and March, did the conversion cost per equivalent unit increase, decrease, or remain the same in March?

Answer 1

a) Direct material cost per equivalent unit = 133380/102600 = 1.30

b) Equivalent unit of conversion = (5700*2/5+98400+4200*4/5) = 104040

Conversion cost per equivalent unit = (39950+22474)/104040 = 0.60

c) Cost of beginning work in process completed during march = (5700*2/5*.60+9291) = 10659

d) Cost of unit started and completed = 1.9*98400 = 186960

e) Cost of ending work in process = (4200*1.3+4200*4/5*.60) = 7140

2) Direct material cost of beginning WIP = 5700*1.3 = 7410

Conversion Cost in Beginning WIP = 9291-7410 = 1881

Equivalent conversion cost = 5700*3/5 = 3420

Conversion Cost per equivalent unit = 1881/3420 = 0.55

Increase by 0.60-0.55 = 0.05