Question

Esty Corporation uses the weighted-average method in its process costing system. This month, the beginning inventory in the first processing department consisted of 800 units. The costs and percentage completion of these units in beginning inventory were: Cost Percent Complete Materials costs $ 5,800 50% Conversion costs $ 6,500 30% A total of 7,700 units were started and 6,600 units were transferred to the second processing department during the month. The following costs were incurred in the first processing department during the month: Materials costs $ 85,300 Conversion costs $ 168,000 The ending inventory was 70% complete with respect to materials and 10% complete with respect to conversion costs. The cost per equivalent unit for materials for the month in the first processing department is closest to

Answer 1

Closing WIP in units = Opening WIP+Units Started-Units Tfd

= 800+7,700-6,600 = 1,900 units

Firstly we need to compute equivalent number of units for materials for the month which is shown as follows:-

Equivalent Units for Materials = Units Tfd+(Closing WIP*% completion)

= 6,600 units+(1,900 units*70%)

= 6,600 units+1,330 units = 7,930 units

Total direct materials cost = Materials cost at the beginning+Added during the month

= $5,800+$85,300 = $91,100

Cost per equivalent units for materials = $91,100/7,930 units = $11.49 per unit