Question

A company that produces a single product using a continuous process had no work in process on April 1. During the month of April, 10,000 units were started and 9,000 completed units were transferred. The ending work-in-process inventory was complete as to materials and 50% complete as to conversion. The cost of direct materials was $114,000, and the cost of direct labor amounted to $38,000. Manufacturing overhead is assigned at the rate of 50% of direct materials. For the purpose of determining the cost of goods manufactured in April, what is the cost per equivalent whole unit

Answer 1

Answer:

$17.40 per unit

Explanation:

beginning WIP = 0

during April 10,000 units were started

9,000 units were completed

the 1,000 units in ending WIP:

• 100% complete in materials
• 50% complete in conversion costs or 500 equivalent units

cost of direct materials = $114,000 / 10,000 = $11.40 per unit

conversion costs = $38,000 + ($38,000 x 50%) = $57,000 / 9,500 = $6 per unit

cost of goods manufactured during April = cost of direct materials per unit + conversion costs per equivalent unit = $11,40 + $6 = $17.40 per unit

Answer 2

The cost per equivalent unit is $17.40 per unit

Calculation of cost per equivalent unit:

Since

beginning WIP = 0

during April 10,000 units were started

9,000 units were completed

So, there is 1,000 units in ending WIP:

Now

100% complete in materials

50% complete in conversion costs or 500 equivalent units

So, cost of direct materials = $114,000 ÷  10,000 = $11.40 per unit

Now

conversion costs = $38,000 + ($38,000 × 50%)

= $57,000 ÷ 9,500

= $6 per unit

Now

cost of goods manufactured during April is

= cost of direct materials per unit + conversion costs per equivalent unit

= $11,40 + $6

= $17.40 per unit

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