Question

Richards Corporation uses the FIFO method of process costing. The following information is available for October in its Fabricating Department: Units: Beginning Inventory: 83,000 units, 70% complete as to materials and 25% complete as to conversion. Units started and completed: 253,000. Units completed and transferred out: 336,000. Ending Inventory: 31,500 units, 40% complete as to materials and 10% complete as to conversion. Costs: Costs in beginning Work in Process - Direct Materials: $40,200. Costs in beginning Work in Process - Conversion: $82,700. Costs incurred in October - Direct Materials: $754,680. Costs incurred in October - Conversion: $922,300. Calculate the cost per equivalent unit of materials.

Answer 1

Answer:

2.59

Explanation:

Calculatation for the cost per equivalent unit of materials

First step is to find the Equivalent unit of material (FIFO)

Equivalent unit of material (FIFO) = [83,000*(100%-70%)+253,000+31,500*40%]

Equivalent unit of material (FIFO) = [83,000*30%+253,000+31,500*40%]

Equivalent unit of material (FIFO) = 24,900+253,000+12,600

Equivalent unit of material (FIFO) = 290,500

Second step is to calculate for the cost per equivalent unit of materials using this formula

Cost per equivalent unit of material = Direct Materials/Equivalent unit of material (FIFO)

Cost per equivalent unit of material = $754,680/290,500

Cost per equivalent unit of material =2.59

Therefore the cost per equivalent unit of materials is 2.59