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# Equivalent Units

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Superior Lighting, Inc., mass produces reading lamps. Materials used in constructing the body of the lamp are added at the start of the process, while the materials used in wiring the lamps are added at the halfway point. All labor and overhead are added evenly throughout the manufacturing process. Superior uses process costing and had the following unit production information available for the monts of June and July:
June July
Number of lamps in beginning work in process 850 1,200
Lamps transferred to finished goods 3,500 3,300
Number of lamps in ending work in process 1,200 900

In June, the lamps in beginning work in process were approximately 80 percent complete, while those in ending work in process were only 30 percent complete. In July, the units remaining in ending work in process were 60 percent complete. all lamps in ending work in process are finished during the next month.

a.
For the month of June, calculate the equivalent units produced for the three major cost categories- body material, wiring materials, and labor and overhead.

b.
For the month of July, calculate the equivalent units produced for the three major cost categories - body materials, wiring materials, and labor and overhead.

#### Solution Summary

The solution explains how to calculate equivalent units of production.

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## Equivalent Units and Cost per Equivalent Unit - Weighted-Average Method

Exercise 4-8 - Equivalent Units and Cost per Equivalent Unit - Weighted-Average Method (L02, L04)

Solex Company produces a high-quality insulation material that passes through two production processes. A quantity schedule for June for the first process follows:

Quantity Schedule

Units to be accounted for:
Work in process, June 1 (materials 75%
Complete: conversion 40% complete) ........ 60,000
Started into production ............................ 280,000
Total units to be accounted for ...................... 340,000

Equivalent Units
___________________________
Materials Conversion
Units accounted for as follows:
Transferred to the next process ..................... 300,000 ? ?
Work in process, June 30 (materials 50%
Complete: conversion 25% complete) 40,000 ? ?
Total units accounted for ............................... 340,000 ? ?

Cost in the beginning work in process inventory of the first processing department were: materials, \$56,600; and conversion cost, \$14,900. Cost added during June were: materials, \$385,000; and conversion cost, \$214,500.

Required:

1. Assume that the company uses the weighted-average method of accounting for units and cost. Determine the equivalent unit for June for the first process.
2. Compute the cost per equivalent unit for June for the first process.

Page 2

Exercise 5-1 Fixed and Variable Cost Behavior (LOI)
Koffee Express operates a number of expresso coffee stands in busy suburban malls. The fixed weekly expense of a coffee stand is \$1,100 and the variable cost per cup of coffee served is \$0.26

Required:
1. Fill in the following table with your estimates of total cost and cost per cup of coffee at the indicated levels of activity for a coffee stand. Round off the cost of a cup of coffee to the nearest tenth of a cent.

Cups of Coffee Served in a Week
1,800 1,900 2,000

Fixed cost ............................................... ? ? ?

Variable cost ............................................ ? ? ?

Total cost ................................................ ? ? ?

Cost per cup of coffee served ........................ ? ? ?

2. Does the cost per cup of coffee served increase, decrease, or remain the same as the number
Of cups of coffee served in a week increases? Explain.

See attached file for full problem description.

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