A factory manufactures sterling silver hoop earrings that it sells to large regional retail establishments. The company has just completed its first month of operations and has some important policy and procedure decisions to make. Their accountants have compiled some cost and production information so that a Process Costing method can be selected. The following table represents the cost data for the month:
The above costs were generated in order to meet the following production for the month:
What is the equivalent cost per unit for Transferred-In (TI), Direct Materials (DM), and Conversion Costs (CC) during the month using the Weighted-Average method? (Round units to the nearest whole number and costs to the two decimal places.)

Question

A factory manufactures sterling silver hoop earrings that it sells to large regional retail establishments. The company has just completed its first month of operations and has some important policy and procedure decisions to make. Their accountants have compiled some cost and production information so that a Process Costing method can be selected. The following table represents the cost data for the month:
 The above costs were generated in order to meet the following production for the month:
 What is the equivalent cost per unit for Transferred-In (TI), Direct Materials (DM), and Conversion Costs (CC) during the month using the Weighted-Average method? (Round units to the nearest whole number and costs to the two decimal places.)

Quizplus · Accepted Answer

This question requires two different figures to calculate the equivalent cost per unit: the total equivalent costs and the equivalent units. The total equivalent costs have been provided, so the equivalent units will have to be calculated. The costs for Transferred-In are given, but the units completed needs to be calculated as Units in Beginning Inventory + Units Transferred-In - Units in Ending Inventory = 884 units + 7,352 units - 903 units = 7,333 units. Next, calculate the equivalent units for each cost category. For Transferred-In and Direct Materials, this will be equal to (7,333 units × 100%) + (903 units × 100%) = 7,333 + 903 units = 8,236 units. Now, divide the total equivalent cost by these units to arrive at the equivalent cost per unit. Transferred-In: $7,809/8,236 units = $0.95 per unit; and Direct Materials: $5,463/ 8,236 units = $0.66 per unit. Equivalent units for Conversion Costs: (7,333 units × 100%) + (903 units × 70%) = 7,333 units + 632 units = 7,965 units. Now, divide the total equivalent cost by these units to arrive at the equivalent cost per unit. Conversion Costs: $9,502/7,965 units = $1.19 per unit.

A Factory Manufactures Sterling Silver Hoop Earrings That It Sells