Question

Old Victrola, Inc., produces top-quality stereos and uses process costing. The manufacture of stereos is such that direct materials, labor, and overhead are all added evenly throughout the production process. Due to the smooth production process, only one cost category—manufacturing costs—is used for equivalent unit calculations. Old Victrola had the following cost and production information available for the months of March and April.

		March				April
Direct materials costs	$	978,460			$	1,168,310
Direct labor costs		2,562,260				3,041,940
Manufacturing overhead applied		3,438,640				3,571,030
Total manufacturing costs	$	6,979,360			$	7,781,280
Units in beginning work in process		7,600				5,000
Units transferred to finished goods		17,100				35,500
Units in ending work in process		5,000				6,400

Beginning work in process was 30 percent complete in March and 60 percent complete in April. Ending work in process was 60 percent complete in March and 35 percent complete in April.

a. For each of the two months, calculate the equivalent units of production.

b-1. For each of the two months, calculate the manufacturing cost per equivalent unit.

b-2. Based on equivalent units produced, did total manufacturing costs per unit increase or decrease between March and April?

c-1. For each of the two months, calculate the direct materials cost per equivalent unit.

c-2.Did the direct materials cost per equivalent unit increase or decrease between March and April?

Answer 1

MARCH MONTH
UNITS TO ACCOUNT FOR:
Beginning Work in Process units				7,600
Add: Units Started in Process				14,500
Total Units to account for:				22,100
UNITS TO BE ACCOUNTED FOR:
Units completed from Beginning WIP				7600
Units started and completed				9,500
Ending Work in Process				5,000
Total Units to be accounted for:				22,100
Equivalent Units:
			Material Cost		Conversion		Manufacturing cost
			% Completion	Units	% Completion	Units	Units
Units completed from Beg. WIP			70%	5,320	70%	5,320	5320
Units started and completed			100%	9,500	100%	9,500	9500
Ending Work in Process			60%	3,000	60%	3,000	3000
Total Equivalent units				17,820		17,820	17820
COST PER EQUIVALENT UNIT:
			Material		Conversion	Manufacturing Cost
Total cost added during the year			978,460		6,000,900	6,979,360
Equivalent Units			17,820		17,820	17820
Cost per Equivalent unit			54.90797		336.7508	391.6588
April Month
UNITS TO ACCOUNT FOR:
Beginning Work in Process units				5,000
Add: Units Started in Process				36,900
Total Units to account for:				41,900
UNITS TO BE ACCOUNTED FOR:
Units completed from Beginning WIP				5000
Units started and completed				30,500
Ending Work in Process				6,400
Total Units to be accounted for:				41,900
Equivalent Units:
			Material Cost		Conversion		Manufacturing cost
			% Completion	Units	% Completion	Units	Units
Units completed from Beg. WIP			40%	2,000	40%	2,000	2000
Units started and completed			100%	30,500	100%	30,500	30500
Ending Work in Process			35%	2,240	35%	2,240	2240
Total Equivalent units				34,740		34,740	34740
COST PER EQUIVALENT UNIT:
			Material		Conversion	Manufacturing Cost
Total cost added during the year			1,168,310		6,612,970	7,781,280
Equivalent Units			34,740		34,740	34740
Cost per Equivalent unit			33.63011		190.3561	223.9862
Req a;
Equivalent units:
March month: 17820 units
Aapril month: 34740 units
Rreq b:
Mannufacturing cost per unit:
March: $ 391.66
April: $ 223.99
Req b-2
Manufacturing cost decrease between march to April.
Req c-1
Direct material cost per unit:
March: $ 54.91
April :   $ 33.63
Req C-2
Material cost has been decrease between march and april.