Question

In: Accounting

Ogdan Outfitters began making stereos & uses the process cost system. All the manufacturing costs are...

Ogdan Outfitters began making stereos & uses the process cost system. All the manufacturing costs are added evenly throughout the production process. Ogdan had the following cost & production information available for the Month of March and April:

                                                                                    March                         April

Direct Material costs.............................$978,460 $1,168,310

Direct Labor costs...............................$2,562,260 $3,041,940

Overhead applied...............................$3,438,640 $3,571,030

  TOTAL $6,979,360 $7,781,280      

Units in beginning Work in Process 7,000                           4,800

Started & Completed 11,500 18,200

Units in the end Work in Process 4,800                           6,400

Beginning Work in Process is 40% complete in March and 60% complete in April. End Work in Process was 40% complete in March and 35% in April.

Instructions:

A) Calculate for the month of March only the Equivalent Full Units of production.

B) Based on the Equivalent Full Units produced in March what is the March cost per unit.

Solutions

Expert Solution

Process costing is the method which uses allocation of production costs to the output of units. The equivalent units can be calculated using First-In-First-Out Method , Last in First Out and Weighted Average Method. In the absence of specific method mentioned in the sum, the following sum is solved using FIFO Method.
Calculation of equivalent full units of production for the month of March
Equivalent full units produced = Equivalent units in beginning Work in Progress + Units Started & Completed + Equivalent Units in ending work in progress
Equivalent Units in opening/ending work in progress = Units in opening/closing WIP * Percentage of Completion
Particulars Equivalent units Working
Equivalent units to be completed in beginning Work in Progress - Refer Note below 2800 7000*40%
Units Started & Completed 11500 Given
Equivalent Units in ending work in progress 1920 4800*40%
Total 16220
Note:
It is given that the opening WIP is completed 40% in March. Hence, it is implied that the same was 0% completed at the beginning of March.
Calculation of cost per unit in the month of March
Particulars Amount in $ Working
Direct Material costs    9,78,460.00 Given
Direct Labor costs 25,62,260.00 Given
Overhead applied 34,38,640.00 Given
Total 69,79,360.00
Number of equivalent units        16,220.00 See working above
Cost per unit 430.29 69,79,360/16220

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ekkarill92 answered 2 years ago
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