Question

Alpha Company, on March 1, 2017 has a beginning Work in Process inventory of zero. All materials are added into production at the beginning of its production. There is only one production WIP inventory. On March 1, Alpha started into production 10,000 units. At the end of the month there were 5,000 units completed and transferred into the Finished Goods Inventory. The ending WIP was 60% complete with respect to conversion. For the month of March the following costs were incurred and recorded in the WIP: Direct Material $20,000 Direct Labor 8,000 Factory Overhead 32,000 Alpha uses the weighted-average process costing method. Use this information to determine for the month of March: (Round & enter final answers to the nearest penny.) 1. the cost per equivalent unit of direct material 2. the cost per equivalent unit of conversion 3. the cost per unit transferred to finished goods

Answer 1

Answer:

1. Cost per equivalent unit of direct material = $4

2. Cost per  equivalent unit of conversion = $13.33

Note: In case it is stated for 5,000 units then cost will be $8 per unit but that  is basic calculation.

3. Cost per unit transferred to finished goods = $17.33

Explanation:

In weighted average production method there is average of all the things

Since opening inventory of work in process = 0

Therefore entire production cost will be distributed

Provided total , and WIP will be as follows

Direct Material = $20,000

Direct Labor = $8,000

Factory Overhead = $32,000

WIP are 60 % complete with respect to conversion cost.

Now conversion cost comprises labor cost and manufacturing overhead cost.

For material it will be 100% complete as material is already brought in

Now using weighted average we have following as value of complete units

Raw material = $20,000 X 100% = $20,000

Labor = $8,000 / 60% = $13,333.33

Factory Overhead = $32,000 / 60% = $53,333.33

1. Cost per equivalent unit of direct material = $20,000/5,000 = $4

2. Cost per  equivalent unit of conversion = ($8,000 + $32,000)/(5,000 units X 60%) = $40,000/3,000 units = $13.33, in case it is stated for 5,000 units then it will be $8 per unit.

3. Cost per unit transferred to finished goods = Total cost of finished goods/Number of finished goods

Total cost of finished goods = $20,000 + $13,333.33 + $53,333.33

= $86,666.67/5,000 units = $17.33