Question

For the month of September, Florida, Inc., incurs a direct materials cost of $12,000 for 7,500 gallons of strawberry lemonade produced in its Mixing Department. It also incurs conversion costs of $6,000 with 80% completed. If the direct materials cost per equivalent unit was $0.90 in August and the conversion cost per equivalent unit was $1.15 per gallon in August, what is the difference in the direct materials cost per equivalent unit between the two months

Answer 1

The difference in the direct materials cost per equivalent unit between the two months is $0.70

What is direct materials cost?

Direct material cost is the cost of the raw materials and components used to create a product.

First, we need to calculate the direct cost per equivalent unit in September.

Direct cost per equivalent unit  

= Total Cost / Total Equivalent units                                                    

= $12,000 / 7,500                                                    

= $1.60

Also,

Difference between the two months.

September - August    

= $1.60 - $0.90

= $0.70

Therefore, the difference in the direct materials cost per equivalent unit between the two months is $0.70

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