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Equivalent Units of Production and Cost per Equivalent Unit

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Problem 3
% Complete % Complete
Units Materials Conversion

Work in process July 1 6,000 75% 40%
Work in process July 31 4,000 50% 25%

Materials cost in work in process July 1 $56,000
Conversion costs in work in process July 1 $14,900
Units started in production 28,000
Units transferred to the next department 30,000
Materials cost added during July $38,500
Conversion costs added during July $21,450

A. Assume the company uses the weighted average method of accounting for units and costs.
Determine the equivalent units produced during July.

B. Compute the cost per equivalent unit of material and of conversion.

The equivalent units of production for a department are the number of units transferred to the
next department plus the equivalent units in the department's ending work in process
inventory.
Cost of beginning
work in process Cost added during
Cost per equivalent unit = inventory + the period
Equivalent units of production

My computations:
Materials Conversion
A. units completed and xfer'd out 30,000 30,000
work in process, July 31:
4,000 units x 50% 2,000
4,000 units x 25% 1,000
Equivalent units of production in work in process 32,000 31,000
for July

B. Total Cost Materials Conversion
Cost to be accounted for:
Work in process, July 1 $70,900 $56,000 $14,900
Costs added in July $59,950 $38,500 $21,450
Total Cost $130,850 $94,500 $36,350

Equivalent units 32,000 31,000
Cost per equivalent unit $2.95 $1.17

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For your convenience, I have attached a copy of your original posting to this note, along with comments. All of your assumptions and calculations were absolutely correct.

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Formatted MS Excel file containing information and examples that illustrate how to figure equivalent units of production and cost per equivalent unit.

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See Also This Related BrainMass Solution

Analysis of Work in Process Account - Weighted Average Method for Dillion Corp

Analysis of Work in Process Account - Weighted Average Method

Dillion Corporation manufactures an industrial cleaning compound that goes through three processing departments-Grinding, mixing, and Cooking. All raw materials are introduced at the start of work in the Grinding Department. The Work in Process T-Account for a recent month is given below.

Work in Process- Grinding Department
Inventory, March 1 (4,500 units; Conversion 60% Completed and transferred to mixing (? Units)...... ?
Complete).......................................................... 12,365
March costs added:
Raw material (56,800 units)............................................................. 113,475
Labor and overhead ........................ 75,319
Inventory, March 31 (2,900 units;
Conversion 70% complete).................... ?

The March 1 work in process inventory consists of $9,125 in materials cost and $3,240 in conversion cost. The company uses the weighted-average method.

Required.
1. Determine the equivalent units of production for March.
2. Determine the costs per equivalent unit for March
3. Determine the total cost of the units completed and transferred to the next department during March and the total cost of ending work in process inventory.
4. What criticism can be made of the unit costs that you have computed if they are used to evaluate how well costs have been control?

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