Question

Explain in a paragraph how the company would calculate the cost to manufacture one unit of product in April 2014 using only the following data.

Work in Process- 10,000 units, 100% complete with respect to direct materials, 30% complete with respect to conversion

Costs in work in process-$30,000 in direct material costs and $1,850 in conversion costs

Answer 1

Since there is 100% complete in material, total direct material cost should be divided by total units for getting material cost per unit; ($30,000 / 10,000 = $3). In case of conversion cost, it is 30% complete; therefore, the equivalent units should be calculated here; this is calculated by multiplying the total units and the conversion rate of 30%; (10,000 × 30% = 3,000); now, total conversion cost should be divided by the equivalent units to get the conversion cost per unit; ($1,850 / 3,000 = 0.62). Lastly, the material cost per unit and the conversion cost per unit should be added to get the manufacturing cost per unit; manufacturing cost per unit = $3 + $0.62 = $3.62 (Answer).