In: Accounting
Direct material cost for equivalent unit is $1.10 and there are 2000 physical units 100% complete with respect to materials. What are the total costs of these 2000 physical units that are 50% complete with respect to conversion and conversion costs are $3.75 per equivalent unit?
a. $4950
b. $5950
c. $6950
d. None of the above
Solution.
Total Costs of 2,000 Phycial Units = E(quivalent Units for Material x Equivalent Unit Cost for Material) + (Equivalent Units for Conversion x Equivalent Unit Cost for Conversion)
Equivalent Units = Physical Units x Percentage of Completion
Here,
Equivalent Units for Direct Material = Physical Units x 100%Complete = 2,000 Units x 100% = 2,000 Units
Equivlanet units for Conversion = Physical Units x 50% Completion = 2,000 Units x 50% = 1,000 Units
Total Costs of 2,000 Phycial Units = (Equivalent Units for Material x Equivalent Unit Cost for Material) + (Equivalent Units for Conversion x Equivalent Unit Cost for Conversion)
= (2,000 Units x $1.10) + (1,000 Units x $3.75)
= $2,200 + $3,750
= $5,950
Hence, the correct option is b. $5,950
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