Question

Badgersize Company has the following information for its Forming Department for the month of August.

Work in Process Inventory, August 1: 20,000 units

Direct materials: 100% complete $ 80,000

Conversion: 20% complete 24,000

Balance in work in process, August 1 $ 104,000

Units started during August 50,000

Units completed and transferred in August 58,000 Work in process (70% complete), August 31 ?

Costs charged to Work in Process in August

Direct materials $ 141,000

Conversion costs: Direct labor $ 124,000

Overhead applied 149,000

Total conversion $ 273,000

Assume materials are added at the start of processing.

Required:

a. Calculate the equivalent units for the Forming Department for the month of August.

b. Find the cost per equivalent unit of input resource. (Round your answers to 2 decimal places.)

Direct Materials Conversion

A. Equivalent Units

B. Cost per equivalent until

Using the ABC method

Answer 1

a)

	Direct materials	conversion
Equivalent unit	50,000	62,400

Explanation of a)

	Direct materials	conversion
Input resources required
To finish beginning inventory, August 1:
Direct materials(20,000 units require 0% to complete )	0
Conversion(20,000 units require 80% to complete )		16000
To start and complete 38000 unit in august(58000 unit transfer - 20,000 unit in beginning inventory =38000 unit)	38000	38000
To start ending inventory in process on august 31(20,000 unit in beginning inventory +50,000 unit started - 58000 unit transfer =12000 unit in ending inventory )
Direct material(12000 unit × 100% complete)	12000
Conversion(12000 unit × 70% complete)		8400
Total equivalent unit in august	50,000	62,400

b)

	Direct materials	conversion
Cost per equivalent units	$2.82	$4.375

Explanation of b)

	Direct materials	conversion
Total cost incurred in august	141000	273000
Equivalent unit consumed in august(see part a)	÷ 50,000	÷62,400
Cost per equivalent unit in august	$2.82	$4.375