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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 cost of direct materials transferred into the Filling Department of Eve Cosmetics Company is $20,000. The conversion cost for the period in the Filling Department is $4,560. The total equivalent units for direct materials and conversion are 50,000 ounces and 45,600 ounces, respectively. Determine the direct materials and conversion costs per equivalent unit.

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.

To Calculate: The equivalent cost per unit of direct material and conversion cost for Company EC.

Explanation

Calculate equivalent cost per unit of direct material for company EC as shown below:

Equivalent cost per unit of Direct materials) =Total direct material cost during the period Equivalents unitsof direct materials =$20,00050,000ounces=$0.40per ounce

Equivalent cost per unit of direct materials is calculated by dividing total direct material cost during the period by equivalents units of direct materials

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