Question

In: Accounting

1.) AB Company has the following production information available for March: Total materials costs

1.) AB Company has the following production information available for March:

Total materials costs $147,000

Equivalent number of complete units of materials 15,000

Total conversion costs $ 75,000

Equivalent number of complete units of conversion costs 12,000

The total manufacturing cost per unit (rounded to nearest cent) is closest to:

A. $6.25

B. $9.80

C. $16.05

D. $8.22

2.) ABD Company, materials purchases and uses during the first quarter are as follows:

Jan. 11, purchased 500 units at $15.00

Feb. 12, purchased 900 units at $13.00

Mar. 18, purchased 200 units at $16.00

Total amount of materials used during the quarters was 1,400 units. If the company applies the average cost method for its inventory valuation. The ending inventory value is closest to:

A. $2,800

B. $3,000

C. $3,200

D. $2,600

Solutions

Expert Solution

Total material cost = $147000

Equivalent number of complete units of materials = 15,000

Material cost per unit = Total material cost/Equivalent number of complete units of materials

= $147000 / 15000 = $9.8

Equivalent number of complete units of conversion costs = 12,000

Total material cost for completed units = Material cost per unit x Completed units

= $9.8 x 12000 = $117600

Total manufacturing costs per uniit =

Total material cost for completed units + Total conversion cost

= $117600 + $75000 = $192600

Equivalent number of complete units = 12000

Total manufacturing cost per unit = Total manufacturing costs per uniit / Equivalent number of complete units

= $192600 / 12000 = $16.05

Answer is C. $16.05

Total number of units purchased = 500 + 900 + 200 = 1600 units

Number of units used during the quarter = 1400 units

Ending inventory in units = 1600 units - 1400 units = 200 units

Average cost per unit =

Total cost of purchases / Total number of units purchased

= 500 x $15 + 900 x $13 + 200 x $16 / 1600

= $7500 + $11700 + $3200 / 1600

= $22400/1600 = $14

Ending inventory value = Average cost per unit x Ending inventory in units

= $14 x 200 units = $2800

Answer is A. $2,800

ekkarill92 answered 1 year ago

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