Question

Pablo Company calculates the cost for an equivalent unit of production using process costing.

Data for June
Work-in-process inventory, June 1: 20,000 units
Direct materials: 100% complete	$	40,000
Conversion: 40% complete		16,000
Balance in work-in-process, June 1	$	56,000
Units started during June		48,000
Units completed and transferred out		48,000
Work-in-process inventory, June 30		20,000
Direct materials: 100% complete
Conversion: 80% complete
Costs incurred during June
Direct materials	$	129,600
Conversion costs
Direct labor		129,600
Applied overhead		168,000
Total conversion costs	$	297,600

Required:

1. Compute the cost per equivalent unit for both the weighted-average and FIFO methods. (Round your answers to 3 decimal places.)

Answer 1

1
Weighted average method:
	Direct materials	Conversion costs
Units completed and transferred out	48000	48000
Work-in-process inventory, June 30	20000	16000
Equivalent units of production	68000	64000
Cost per equivalent unit of production:
Cost of beginning work in process	40000	16000
Costs incurred this period	129600	297600
Total costs	169600	313600
÷ Equivalent units of production	68000	64000
Cost per equivalent unit of production	2.494	4.900
Cost per equivalent unit = 2.494+4.9= $7.394
FIFO method:
	Direct materials	Conversion costs
Work-in-process inventory, June 1	0	12000	=20000*(1-40%)
Started and completed	28000	28000
Work-in-process inventory, June 30	20000	16000
Equivalent units of production	48000	56000
Costs incurred during June	129600	297600
÷ Equivalent units of production	48000	56000
Cost per equivalent unit of production	2.700	5.314
Cost per equivalent unit = 2.7+5.314= $8.014