Scrappy Company is preparing their costing data for their most recent year which is their fourth year of operations. Scrappy creates booklets of metallic scrapbook paper that it sells via an online platform to customers all around the world. They started the year with 980 units with Direct Materials (DM) 100% completed and Conversion Costs (CC) 37% completed. During the year, Scrappy started 56,780 units and completed 56,526 units, and at year-end they had 1,234 units with DM 100% completed and CC 78% completed. Their equivalent costs for DM are $27,890, and their equivalent costs for CC are $33,568. Scrappy has chosen the First-In, First-Out (FIFO) method for its process costing. What is the equivalent cost per unit for Direct Materials?
(Round units to whole number and cost to the nearest cent.)

Question

Quizplus · Accepted Answer

This question requires familiarity with the calculations for equivalent units and equivalent cost per unit. Using the FIFO method, the focus is on what costs and units have been added during the current period. The equivalent units are calculated as follows: (980 × 0%) + (55,546 × 100%) + (1,234 × 100%) = 0 + 55,546 + 1,234 = 56,780 equivalent units. Now, calculate the equivalent cost per unit by dividing the equivalent Direct Material cost by the number of equivalent units that were just calculated. $27,890/56,780 = $0.49 cost per equivalent unit.

Scrappy Company Is Preparing Their Costing Data for Their Most