Question

During March, the production department of a process operations system completed and transferred to finished goods 27,000 units that were in process at the beginning of March and 180,000 units that were started and completed in March. March's beginning inventory units were 100% complete with respect to materials and 55% complete with respect to labor. At the end of March, 24,000 additional units were in process in the production department and were 100% complete with respect to materials and 60% complete with respect to labor. The production department incurred direct materials cost of $254,100 and its beginning inventory included materials cost of $93,800. Compute the direct materials cost per equivalent unit for the department using the weighted-average method.

Answer 1

Answer:

Cost per equivalent unit of material =$1.51

                                 

Explanation:

Equivalent units are notional whole units which represent incomplete work and are used to apportion production costs between work in progress and finished work.

Equivalent units = Degree of completion × units

Items                                                   Equivalent units

Opening inventory    27,000×100%   =    27,000

Fully worked              180,000× 100% =  180,000

Closing inventory      24,000× 100%  =   24,000

Total equivalent units                               231,000

Cost per equivalent unit of material = 93,800+254,000/231,000 units