Sidney Company manufactures plastic cups in one department.The following information is available: The units in the ending work-in-process inventory are 100 percent complete with respect to direct materials and 50 percent complete with respect to conversion costs.The cost of one completed unit is ________.

Question

Sidney Company manufactures plastic cups in one department.The following information is available:   The units in the ending work-in-process inventory are 100 percent complete with respect to direct materials and 50 percent complete with respect to conversion costs.The cost of one completed unit is ________.

Quizplus · Accepted Answer

To find the cost of one completed unit, we need to use the weighted average method.

First, we need to calculate the equivalent units of production for both direct materials and conversion costs.

Direct materials:
Units started and completed = 18,000
Units in ending WIP inventory = 1,000 × 100% = 1,000
Total equivalent units of production for direct materials = 18,000 + 1,000 = 19,000

Conversion costs:
Units started and completed = 18,000
Units in ending WIP inventory = 1,000 × 50% = 500
Total equivalent units of production for conversion costs = 18,000 + 500 = 18,500

Next, we need to calculate the total cost to account for (TCA) by adding the beginning WIP inventory cost to the current period cost.

TCA = Beginning WIP inventory cost + Current period cost
TCA = $2,000 + ($120,000 ÷ 18,000 units) × 19,000 equivalent units
TCA = $2,000 + $126,666.67
TCA = $128,666.67

Finally, we can calculate the cost per equivalent unit by dividing the TCA by the total equivalent units of production.

Cost per equivalent unit = TCA ÷ Total equivalent units of production
Cost per equivalent unit = $128,666.67 ÷ 19,000 direct materials equivalent units
Cost per equivalent unit = $6.77 per direct materials equivalent unit

To find the cost of one completed unit, we add together the direct materials cost per unit and the conversion costs cost per unit.

Cost of one completed unit = Direct materials cost per unit + Conversion costs cost per unit
Cost of one completed unit = ($6.77 × 1) + (($120,000 ÷ 18,000 units) × 50%) × 1
Cost of one completed unit = $6.77 + $1.80
Cost of one completed unit = $8.57

Therefore, the cost of one completed unit is $8.57 (Choice B).

Sidney Company Manufactures Plastic Cups in One Department