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		54,000
Units completed and transferred in August		59,000
Work in process (70% complete), August 31		?
Costs charged to Work in Process in August
Direct materials	$	165,000
Conversion costs:
Direct labor	$	113,000
Overhead applied		149,000
Total conversion	$	262,000

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.)

Answer 1

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

	Direct Materials	Conversion
Total equivalent units in August	54000	65500

Working notes for the answer:

	Direct Materials	Conversion
Input resources required
To finish beginning inventory, August 1:
Direct materials (20,000 units require 0% to complete)	0
Converson (20,000 units require 80% to complete)		16000
To start and complete 38,000 units in August*	39000	39000
To start ending inventory in process on August 31:**
Direct materials (15,000 units 100% complete)	15000
Conversion (15,000 units 70% complete)		10500
Total equivalent units in August	54000	65500

1

*59,000 units transferred – 20,000 units in beginning inventory = 39,000 units started and completed.

2

**20,000 units in beginning inventory + 54,000 units started – 59000 units transferred = 14,000 units in ending inventory.

_______________________________________________________

b. Find the cost per equivalent unit of input resource.

	Direct Materials	Conversion
Total cost incurred in August	165000	262000
Equivalent units consumed in August (see part a.)	÷ 54,000	÷ 65,500
Cost per equivalent unit in August	3.06	4.00