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 1 year agoRelated Solutions
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