A company has decided that it no longer needs to extensively count and inspect the products it buys from a particular supplier.
1 answer:
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Solution:
Working notes:
Calculate opening work in process inventory for conversion costs as shown below:
Opening work in process
inventory for conversion costs = 1- = 2/5
= 40 %
Calculate units started and completed in October as shown below:
Units started and completed in July = ( Units transferred out — opening work in process inventory
= 25, 700 units — 2,300 units = 23, 400 units
Calculate whole ending work in process inventory in October as shown below:
Opening work in process inventory + Whole ending work in ) = in October process inventory Received from material storeroom — Transferred to packing department )
= 2,300 units + 26,000 units — 25, 700 units = 2, 600 units
Calculate ending work in process inventory for conversion costs as shown below:
Ending work in process inventory for conversion costs )
(Total units for ending work in process inventory x Completed percent for conversion costs = 2, 600 units x 1 = 520 units )
Equivalent units for production is calculated by adding units of opening work in process inventory, transferred to finished goods in October, and units for ending work in process inventory. Therefore, an equivalents unit for production for direct materials is 26,000 units and equivalent units for production for conversion costs is 24,840 units.
Calculate direct materials and conversion cost equivalent cost per unit for October as shown below:
Direct material cost per unit — Total direct material costs Equivalent units for direct materials 8429,000 — 26,000 units = $16.50 Per unit
Conversion cost per unit — Total conversion costs Eqtuv' aka! units for conversion $149,040 — 24,840 units
= $6