Question

Costs per Equivalent Unit and Production Costs

The following information concerns production in the Forging Department for November. All direct materials are placed into the process at the beginning of production, and conversion costs are incurred evenly throughout the process. The beginning inventory consists of $105,410 of direct materials.

ACCOUNT Work in Process—Forging Department							ACCOUNT NO.
Date		Item	Debit		Credit		Balance
							Debit		Credit
Nov.	1	Bal., 8,300 units, 30% completed					114,125
	30	Direct materials, 76,000 units	942,400				1,056,525
	30	Direct labor	121,700				1,178,225
	30	Factory overhead	168,064		?		1,346,289
	30	Goods finished, ? units					?
	30	Bal., 6,600 units, 80% completed					?

Cost per equivalent units of $12.40 for Direct Materials and $3.60 for Conversion Costs.

Based on the above data, determine each of the following amounts.

If required, round your interim calculations to two decimal places. Round final answers (a-c) to the nearest dollar.

a. Cost of beginning work in process inventory completed in November.
$

b. Cost of units transferred to the next department during November.
$

c. Cost of ending work in process inventory on November 30.
$

d. Costs per equivalent unit of direct materials and conversion included in the November 1 beginning work in process. If required, round your answers to two decimal places.

Direct materials cost per equivalent unit	$
Conversion cost per equivalent unit	$

e. The November increase or decrease in costs per equivalent unit for direct materials and conversion from the previous month. If required, round your answers to two decimal places.

	Increase or Decrease	Amount
Change in direct materials cost per equivalent unit		$
Change in conversion cost per equivalent unit

Answer 1

Working notes :

Units transferred to next department:

Beginning inventory units	8,300
Units started	76,000
Total units accounted for	84,300
Units completed and transferred	77,700
Ending inventory units	6,600
Total units to account for	84,300

a.

Cost of beginning work in process :

Balance as on November 1	$114,125
Further cost incurred to complete (8,300*70%*$3.6)	20,916
Cost of beginning work in process	$135,041

Cost of units started and completed:

Cost of units started and completed
Direct material (77,700-8,300)= 69,400*$12.4	$860,560
Conversion cost (69,400*$3.6)	249,840
Cost of units started and completed	$1,110,400

b.

Cost of units transferred to next department:

Cost of beginning work in process	$135,041
Cost of units started and completed	1,110,400
Total cost of units transferred to next department	$1,245,441

C.

Cost of ending work in process:

Direct material (6,600*$12.4)	$81,840
Conversion cost (6,600*80%*$3.6)	19,008
Cost of ending work in process	$100,848

d.

Direct material cost per equivalent unit included in November 1 = Beginning direct material cost / Equivalent units

Direct material cost per equivalent unit included in November 1 = $105,410 / 8,300 = $12.7

Conversion cost per equivalent unit included in November 1 = Beginning conversion cost / Equivalent units

Conversion cost per equivalent unit included in November 1 = ($114,125-105,410) / 8,300*30%

Conversion cost per equivalent unit included in November 1 = $8,715 / 2,490 = $3.5

e.

	Increase or decrease	Amount
Change in direct materials cost per equivalent unit	Decrease	$0.3 ($12.7-12.4)
Change in conversion cost per equivalent unit	Increase	$0.1 ($3.6-3.5)