Question

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Pacific Ink had beginning work-in-process inventory of $890,960 on October 1. Of this amount, $358,200 was the cost of direct materials and $532,760 was the cost of conversion. The 62,000 units in the beginning inventory were 25 percent complete with respect to both direct materials and conversion costs.

During October, 130,000 units were transferred out and 44,000 remained in ending inventory. The units in ending inventory were 75 percent complete with respect to direct materials and 35 percent complete with respect to conversion costs. Costs incurred during the period amounted to $3,304,000 for direct materials and $4,130,820 for conversion.

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

Equivalent units for materials
Equivalent units for conversion costs

B. Compute the cost per equivalent unit for direct materials and for conversion costs using the FIFO method. (Round your answers to 2 decimal places.)

	Cost Per Equivalent Unit
Direct materials
Conversion costs

Answer 1

(A) Barrett Company has completed all operating budgets other the income statement for 2017.

  

Equivalent units for materials	147500
Equivalent units for conversion costs	129900

	Materials	Conversion Cost
Beginning WIP	(62000 * 75%) =46500	(62000 * 75%) =46500
Units started and completed	68000	68000
Ending WIP	(44000 * 75%) =33000	(44000 * 35%) =15400
Equivalent Units	147500	129900

(B) Compute the cost per equivalent unit for direct materials and for conversion costs using the FIFO method

	Cost per Equivalent unit
Direct Materials	$22.40
Conversion cost	$31.80

	Materials	Conversion Cost
Cost incurred during the period(A)	$3304000	$4130820
Equivalent Units(B)	147500	129900
Cost per EUP (A/B)	$22.40	$31.80