Billy Bob 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 60 percent complete with respect to conversion costs.The cost of one completed unit is ________.

Question

Billy Bob 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 60 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 calculate the equivalent units of production for direct materials and conversion costs and then divide the total cost by the equivalent units.

Direct Materials:
Units started and completed during the period = 12,000
Units in ending WIP inventory = 1,000
Total units accounted for = 13,000

Equivalent units of production for direct materials = units completed + (ending WIP inventory * % complete)
Equivalent units of production for direct materials = 12,000 + (1,000 * 100%) = 13,000

Conversion Costs:
Equivalent units of production for conversion costs = units completed + (ending WIP inventory * % complete)
Equivalent units of production for conversion costs = 12,000 + (1,000 * 60%) = 12,600

Total cost = $53,550
Cost per equivalent unit = total cost / total equivalent units of production
Cost per equivalent unit = $53,550 / 25,600 (13,000 for direct materials and 12,600 for conversion costs)
Cost per equivalent unit = $2.09 (rounded to the nearest cent)

Cost per completed unit = cost per equivalent unit * 100% (since ending WIP inventory is already accounted for in the equivalent units calculation)
Cost per completed unit = $2.09 * 100% = $4.18 (rounded to the nearest cent)

Therefore, the best choice is B) $4.25 since it is the closest answer option to $4.18.

Billy Bob Company Manufactures Plastic Cups in One Department