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How is the concept of cost per equivalent unit used to assign costs to (1) completed...

How is the concept of cost per equivalent unit used to assign costs to (1) completed units transferred out and (2) units still in work-in-process (WIP) inventory at the end of the period?

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Answer #1

Answer:

There are four steps that involve the assignment of costs to work-in-progress inventory units and finished goods (completed) transferred out. The four steps are as follows:

Step 1: The flow of units physically should be briefly noted.

Equivalent Units Of

Direct Material

Direct Labour

Overheads

Calculation of above equivalent units.

Step 2: Costs should be separated and assigned to direct materials, direct labour and overheads respectively. Costs should be briefed and accounted for.

Step 3: Cost per equivalent units should also be calculated.

Step 4: The costs should be assigned to the work-in-progress inventory and completed finished goods inventory by using the cost per equivalent units.

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