   Chapter 20, Problem 20.5BPE

Chapter
Section
Textbook Problem

Cost per equivalent unitThe cast of direct materials transferred into the Rolling Department of Keystone Steel Company is $510,000. The conversion cost for the period in the Rolling Department is$81,200. The total equivalent units for direct materials and conversion are 8,500 tons and 8,120 tons, 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 KS.

Explanation

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

Equivalent cost per unit of Direct materials) =Total direct material cost during the period Equivalents unitsof direct materials =$510,0008,500tons=$60per ton

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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