Question

O'Leary Company manufactures Product Z in a two-stage production cycle in Departments A and B. Materials are added at the beginning of the process in Department B. O'Leary uses the weighted-average method. Conversion costs for Department B were 40% complete as to the 27,500 units in the beginning work-in-process (WIP) inventory and 50% complete as to the 38,500 units in the ending work-in-process inventory. 55,000 units were completed and transferred out of Department B during October. An analysis of the costs relating to work-in-process inventories and production activity in Department B for October follows:

	Transferred- in Costs			Materials Costs			Conversion Costs
WIP, October 1:	$	55,000		$	16,500		$	5,500
Costs added in October		132,000			30,250			24,200

The total cost per equivalent unit transferred-out for October of Product Z, rounded to the nearest penny, was:

Answer 1

	Transferred-in costs	Materials cost	Conversion cost
Units completed and transferred out	55000	55000	55000
(+) Ending equivalent unit [ Ending work in process units * % completion ]	38500	38500	19250
Total equivalent units of production	93500	93500	74250

	Transferred-in costs	Materials cost	Conversion cost	Total
Cost of WIP, October 1	55000	16500	5500
(+) Costs added in October	132000	30250	24200
Total cost	187000	46750	29700
(/) Total equivalent units of production	93500	93500	74250
cost per equivalent unit	2.00	0.50	0.40	2.90

Answer : $2.90