Chapter 3, Problem 11E

1.

To determine

To compute: Cost per equivalent unit of production.

Explanation of Solution

For direct material:

Given,
Total direct material cost is $968,840.
Total EUP (Direct Material) is 329,600 units.

Formula to calculate cost per equivalent unit of production,

$\text{Cost}\text{per}\text{EUP}\text{(Direct}\text{Material)}=\frac{\text{Total}\text{Direct}\text{Material}\text{Cost}}{\text{Total}\text{EUP}\text{(Direct}\text{Material)}}$

Substitute $968,840 for total direct material cost and 329,600 units for total EUP (direct material).

$\begin{array}{c}\text{Cost}\text{per}\text{EUP}\text{(Direct}\text{Material)}=\frac{\$968,840}{329,600}\\ =\$2.94\end{array}$

Hence, cost per EUP (direct material) is $2.94.

Working note:

Calculationof total direct material cost,

$\begin{array}{c}\text{Total}\text{Direct}\text{Material}\text{Cost}=\left(\begin{array}{l}\text{Direct}\text{Material}\text{In}\text{the}\text{opening}\text{inventory}\\ +\text{Direct}\text{matrial}\text{used}\text{during}\text{the}\text{month}\end{array}\right)\\ =\$118,472+\$850,368\\ =\$968,840\end{array}$

For conversion:

Given,
Total conversion cost is $698,520.
Total EUP (Conversion) is 300,600 units.

Formula to calculate cost per equivalent unit of production,

$\text{Cost}\text{per}\text{EUP}\text{(Conversion)}=\frac{\text{Total}\text{Direct}\text{Material}\text{Cost}}{\text{Total}\text{EUP}\text{(Conversion)}}$

Substitute $698,520 for total conversion cost and 300,600 units for total EUP (Conversion).

$\begin{array}{c}\text{Cost}\text{per}\text{EUP}\text{(Direct}\text{Material)}=\frac{\$698,520}{300,600}\\ =\$2.32\end{array}$

Hence, cost per EUP (Conversion) is $2.32.

Working notes:

Calculation for total direct material cost,

$\begin{array}{c}\text{Total}\text{Conversion}\text{Cost}=\left(\begin{array}{l}\text{Conversion}\text{Cost}\text{In}\text{the}\text{opening}\text{inventory}\\ +\text{Conversion}\text{Cost}\text{used}\text{during}\text{the}\text{month}\end{array}\right)\\ =\$48,594+\$649,926\\ =\$698,520\end{array}$

2.

To determine

To compute: Assign cost to forming department.

Explanation of Solution

For completed goods:

Given,
Direct material cost for completed goods is $882,000.
Conversion cost for completed goods is $696,000.

Formula to calculate the cost of unit completed,

$\text{Cost}\text{of}\text{Units}\text{Completed}=\left(\begin{array}{l}\text{Direct}\text{Material}\text{Cost}\text{for}\text{Completed}\text{Goods}\\ +\text{Conversion}\text{Cost}\text{for}\text{Completed}\text{Goods}\end{array}\right)$

Substitute $882,000 for direct material cost for completed goods and $696,000 for conversion cost for completed goods.

$\begin{array}{c}\text{Cost}\text{of}\text{Units}\text{Completed}=\$882,000+\$696,000\\ =\$1,578,000\end{array}$

Hence, cost of unit completed is $1578,000.

Working notes:

Calculation of direct material cost for completed goods,

$\begin{array}{c}\text{Direct}\text{Material}\text{Cost}\text{for}\text{Completed}\text{Goods}=\left(\begin{array}{l}\text{Completed}\text{goods}\\ \times \text{Cost}\text{per}\text{EUP}\text{(Direct}\text{Material)}\end{array}\right)\\ =300,000\times \$2.94\\ =\$882,000\end{array}$

Calculation of conversion cost for completed goods,

$\begin{array}{c}\text{Conversion}\text{Cost}\text{for}\text{Completed}\text{Goods}=\left(\begin{array}{l}\text{Completed}\text{goods}\\ \times \text{Cost}\text{per}\text{EUP}\text{(Conversion)}\end{array}\right)\\ =300,000\times \$2.32\\ =\$696,000\end{array}$

For work in process (end):

Given,
Direct material cost for work in process (end) is $192,864.
Conversion cost for work in process (end) is $57,072.

Formula to calculate the cost of work in process (end),

$\text{Cost}\text{of}\text{work in process }\left(\text{end}\right)=\left(\begin{array}{l}\text{Direct}\text{Material}\text{Cost}\text{for}\text{Completed}\text{Goods}\\ +\text{Conversion}\text{Cost}\text{for}\text{Completed}\text{Goods}\end{array}\right)$

Substitute $192,864 for direct material cost for work in process (end) and $57,072 for conversion cost for work in process (end).

$\begin{array}{c}\text{Cost}\text{of}\text{work in process }\left(\text{end}\right)=\$192,864+\$57,072\\ =\$249,936\end{array}$

Hence,cost of work in process (end) is $249,936.

Working notes:

Calculation of direct material cost for work in process (end),

$\begin{array}{c}\left[\begin{array}{l}\text{Direct}\text{Material}\text{Cost}\text{for}\\ \text{work in process }\left(\text{end}\right)\end{array}\right]=\left[\begin{array}{l}\text{EUP}\text{(Direct}\text{Material)}\text{for}\text{work in process }\left(\text{end}\right)\\ \times \text{Cost}\text{per}\text{EUP}\text{(Direct}\text{Material)}\end{array}\right]\\ =65,600\times \$2.94\\ =\$192,864\end{array}$

Calculation of conversion cost for work in process (end),

$\begin{array}{c}\left[\begin{array}{l}\text{Conversion}\text{Cost}\text{for}\\ \text{Completed}\text{Goods}\end{array}\right]=\left[\begin{array}{l}\text{EUP}\text{(Conversion)}\text{for}\text{work in process }\left(\text{end}\right)\\ \times \text{Cost}\text{per}\text{EUP}\text{(Conversion)}\end{array}\right]\\ =24,600\times \$2.32\\ =\$57,072\end{array}$