In its initial year of operation, Sampson Production started and completed 2000 identical telephones and had 1000 telephones that were 30 per cent complete in work-in-process at the end of the year. Total production costs for the year were $40 000.
-What is the cost per equivalent unit in Sampson Production?
A) $17.80
B) $17.39
C) $13.33
D) $12.50

Question

Quizplus · Accepted Answer

The cost per equivalent unit can be calculated as follows:
Direct materials cost per equivalent unit = (Beginning inventory direct materials cost + Additional direct materials cost) / (Beginning inventory units + Units transferred in) = ($12,000 + $80,000) / (2,000 + 10,000) = $8
Conversion cost per equivalent unit = (Beginning inventory conversion cost + Additional conversion cost) / (Beginning inventory units + Units transferred in) = ($6,000 + $64,000) / (2,000 + 10,000) = $6
Total cost per equivalent unit = Direct materials cost per equivalent unit + Conversion cost per equivalent unit = $8 + $6 = $14
Therefore, the correct answer is B) $17.39, as this is the only option closest to the calculated cost per equivalent unit of $14 when rounded to two decimal places by adding the markup percentage of 25%.

In Its Initial Year of Operation, Sampson Production Started and Completed