Question

Perrette Motor Company rebuilds automobile engines that have been damaged or are in need of extensive repair. The rebuilt engine has a 100,000-mile warranty and is purchased by auto shops, large motor pools in companies and governmental units, and some individual auto owners. The plant at Dayton, Ohio, specializes in the Ford V6 engine. Approximately 630 to 830 engines are rebuilt each month, and the costs of the plant are assigned to monthly production using weighted-average process costing. The current month began with a work-in-process inventory of 120 engines which were 50% complete for materials and 50% complete for conversion costs. The materials cost in beginning work-in-process was $68,000, while the conversion cost was $73,200. A total of 530 engines were completed and shipped out during the month, and total materials cost of $636,000 and conversion cost of $731,400 were incurred during the month. The ending work-in-process of 220 units was 50% complete for materials and 30% complete for conversion costs.
Required:
Compute the cost per equivalent unit for materials and conversion for the month.
material cost per equivalent unit:
conversion cost per equivalent unit;

Answer 1

Answer:

Perrette Motor Company

Computation of the cost per equivalent unit for materials and conversion for the month:

1. Material cost per equivalent unit: $1,100

2. Conversion cost per equivalent unit: $1,350

Explanation:

a) Data and Calculations:

                                Units     % of completion          Equivalent unit

                                          Materials Conversion    Materials Conversion

Beginning WIP        120         50%        50%                 60                60

a) Started and

Completed             530        100%       100%             530               530

b) Ending WIP        220          50%        30%              110                  66

Equivalent units                                                        640                596

Cost of production:

                                       Materials      Conversion

Beginning WIP              $68,000          $73,200

Started & completed    636,000           731,400

Total cost                    $704,000       $804,600

Equivalent units               640                   596

Cost per equivalent unit $1,100             $1,350

b) When calculating the equivalent units under the weighted average process costing method, the units beginning work-in-process are not taken into consideration, but the costs are.