Whimper Chemicals Limited has started a new process producing silent explosives. During the month of April, 10,000 units of material were input to the process at a cost of £20,000. Labour costs incurred in the month were £11,600 and overheads added to the process totalled up to £6,032. Normal losses from the process are 2% of input materials. 9,100 units of finished production were transferred to finished goods stores during the month. At 30 April, there were 800 units of work in progress (WIP) which were 75% complete with respect to materials, labour and overhead. What is the cost per equivalent unit that will be used in valuing finished production, work in progress, abnormal gains and abnormal losses in the silent explosives process?

Question

Quizplus · Accepted Answer

The total cost is £37,632 (£20,000 materials + £11,600 labour + £6,032 overheads). Equivalent units are calculated as follows: 9,100 finished units + 800 WIP units * 75% = 600 equivalent units. Total equivalent units = 9,700. Cost per equivalent unit = £37,632 / 9,700 = £3.88.

Whimper Chemicals Limited Has Started a New Process Producing Silent