Question

In the month of June, a department had 10,000 units in beginning work in process that were 70% complete. During June, 40,000 units were transferred into production from another department. At the end of June, there were 5,000 units in ending work in process that were 40% complete. Materials are added at the beginning of the process, while conversion costs are incurred uniformly throughout the process.
The total cost for materials was $450,000 and conversion was $400,000.
1. What was the unit materials costs in June?
a. $8.18
b. $9.00
c. $10.00
d. $10.71
2. What was the unit conversion cost in June?
a. $7.27
b. $7.69
c. $8.88
d. $9.52

Answer 1

Answer:

Cost per material= $9

Cost per conversion = $8.51 unit

Explanation:

We would assume the company uses weighted average method of valuation.

Under the weighted average method of valuation, to account for completed units, it is assumed that the entire degree of work required is done in the period under consideration. So there is no separation of the completed units into opening inventory and fully worked.

Cost per Equivalent unit= Total cost / Equivalent unit

Completed units = transferred in + opening inventory -closing inventory

               = 40,000 + 10,000 - 5,000 =45,000  units

Equivalent unit of material = (100%× 45,000) + (100%× 5000)= 50,000

Cost per material = $450,000/50,000= $9

Equivalent unit of Conversion cost =(100%× 45,000) + (40%× 5000)= 47,000

Cost per conversion cost = $400,000/ 47,000 units

               = $8.51 unit

Cost per material= $9

Cost per conversion = $8.51 unit