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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Cost per equivalent unit

The following information concerns production in the Forging Department for November. All direct materials are placed into the process at the beginning of production, and conversion costs are incurred evenly throughout the process. The beginning inventory consists of $9,000 of direct materials.

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a. Determine the number of units transferred to the next department.

b. Determine the costs per equivalent unit of direct materials and conversion.

c. Determine the cost of units started and completed in November.

(a)

To determine

Process costs

It is a method of cost accounting, which is used where the production is continuous, and the product needs various processes to complete. This method is used to ascertain the cost of the product at each process or stage of production.

Equivalents units for production

The activity of a processing department in terms of fully completed units is known as equivalent units. It includes the completed units of direct materials and conversion cost of beginning work in process, units completed and transferred out, and ending work in process.

Cost per unit

Total unit cost is the cost incurred by the company to produce one unit of product. The unit cost is calculated by dividing the units produced with the total cost.

To Determine: The number of units transferred to next department.

Explanation

Calculate the number of units transferred to next department as shown below:

Figure (1)

Working notes:

Calculate percentage to complete for opening work in process inventory for forgoing department as shown below:

Percentage to complete for conversion costs opening work in process inventory) = 1 60%=40%

Calculate started and completed units for assembly department as shown below:

Started and completed units =(Transferred to finished goods Ending work in process inventory units)=12,900units x

(b)

To determine
The equivalent cost per equivalent unit for direct materials and conversion costs for assembly department.

(c)

To determine
The cost units for started and completed.

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