Question

Solomon Ski Company manufactures snow skis. During the most recent accounting period, the company’s finishing department transferred 4,150 sets of skis to finished goods. At the end of the accounting period, 480 sets of skis were estimated to be 50 percent complete. Total product costs for the finishing department amounted to $285,350.
Required

Determine the cost per equivalent.

Determine the cost of the goods transferred out of the finishing department.

Determine the cost of the finishing department’s ending work in process inventory.

Answer 1

The various costs for Solomon Ski Company during the recent accounting period are determined as follows:

1. Cost per equivalent unit is $65.

2. Cost of finished goods transferred out from the finishing department is $269,750.

3. Cost of the ending WIP inventory is $15,600.

What is the cost per equivalent unit?

The cost per equivalent unit refers to the average cost per unit based on the total production costs divided by the total equivalent units of production.

The equivalent units of production depend on the degree or percentage of completion for the various cost classes.

Data and Calculations:

Transfer to finished goods = 4,150

Ending inventory = 480

Degree of completion of the ending inventory = 50%

Total equivalent units = 4,390 (4,150 + 480 x 50%)

Total production costs = $285,350

Cost per equivalent unit = $65 ($285,350/4,390)

Cost of finished goods = $269,750 ($65 x 4,150)

Cost of the ending WIP = $15,600 ($65 x 240)

Thus, equivalent units refer to the degree of work completed per unit.

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