Question

Massey Corporation uses a process cost system and the weighted-average cost flow assumption. Production begins in the Fabricating Department where materials are added at the beginning of the process and conversion costs are incurred uniformly throughout the process. On March 1, the beginning work in process inventory consisted of 20,000 units which were 60% complete and had a cost of $175,000, $145,000 of which were materials costs. During March, the following occurred: Materials added $305,000 Conversion costs incurred $120,000 Units completed and transferred out in March 50,000 Units in ending work in process March 31 (40% complete) 25,000 Calculate the unit cost:  

Answer 1

Ans:

Statement showing equivalent units

                                                                          

		Equivalent units =% of completion*Physical units
	Physical Units	Materials	Conversion Costs
Transferred out	50,000 Units	50,000 Units	50,000 Units
Work in process, March 31	25,000 Units	25,000 Units	10,000 Units (25,000units × 40%)
Total	75,000 Units	75,000 Units	60,000 Units

.Materials cost per unit = $ 6

= ($145,000+$305,000* ÷ 75,000 units)

Conversion cost per unit = $2.5

    = ($30,000+$120,000 ÷ 60,000 units

Total cost per Equivalent unit =6+2.5 =$8.5

Notes for understanding above calculations:

1)Material cost per unit =Beginning inventory cost + Material Added/Equivalent units

2) Conversion cost per unit=

=conversion cost in beginning inventory cost + conversion cost in MARCH/Equivalent units

3)Hear we fallowed weighted average method for calculating equivalent unit cost

4)And Material Portion in Ending inventory completed 100%