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		47,000
Units completed and transferred in August		57,000
Work in process (70% complete), August 31		?
Costs charged to Work in Process in August
Direct materials	$	142,000
Conversion costs:
Direct labor	$	104,000
Overhead applied		137,000
Total conversion	$	241,000

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	47,000
b.	Cost per equivalent unit

Answer 1

Solution a:

It is assumed that company uses FIFO method to account for cost of ending WIP and units transferred out.

Badgersize Company
Forming Department
Computation of Equivalent unit (FIFO)
Particulars	Physical units	Material	Conversion
Units to be accounted for:
Beginning WIP Inventory	20000
Units started this period (25700+2600-2300)	47000
Total unit to be accounted for	67000
Units Accounted for:
Units completed and transferred out
From beginning inventory Material - 0% Conversion - 80%	20000	0	16000
Started and completed currently	37000	37000	37000
Units in ending WIP Material - 100% Conversion - 70%	10000	10000	7000
Total units accounted for	67000	47000	60000

Solution b:

Badgersize Company
Forming Department
Computation of Cost per Equivalent unit
Particulars	Total cost	Material	Conversion
Current period cost	$383,000.00	$142,000.00	$241,000.00
Equivalent units		47000	60000
Cost per equivalent unit		$3.02	$4.02