Organic Sugar Company at Ohio has six processing departments for refining sugar: Affination, Carbonatation, Decolorization, Boiling, Recovery, and Packaging. Conversion costs are added evenly throughout each process. Data from the month of August for the Decolorization Department are as follows: The ending Work-in-Process Inventory is 100% and 65% complete with respect to direct materials and conversion costs respectively. Compute the cost per equivalent unit for the units transferred to the Boiling process. (Round your answer to two decimal places)

Question

Organic Sugar Company at Ohio has six processing departments for refining sugar: Affination, Carbonatation, Decolorization, Boiling, Recovery, and Packaging. Conversion costs are added evenly throughout each process. Data from the month of August for the Decolorization Department are as follows:   The ending Work-in-Process Inventory is 100% and 65% complete with respect to direct materials and conversion costs respectively. Compute the cost per equivalent unit for the units transferred to the Boiling process. (Round your answer to two decimal places)

Quizplus · Accepted Answer

To calculate the cost per equivalent unit, we need to add up the total costs incurred in the Decolorization department and divide it by the equivalent units produced.

Total Costs:
Direct Materials = $35,200
Conversion Costs = $98,000
Total Costs = $133,200

Equivalent Units:
100% complete units transferred out = 25,000 metric tons
65% complete ending WIP = 6,500 metric tons x 65% = 4,225 metric tons
Equivalent Units = 29,225 metric tons

Cost per Equivalent Unit:
Cost per Equivalent Unit = Total Costs / Equivalent Units
Cost per Equivalent Unit = $133,200 / 29,225 metric tons
Cost per Equivalent Unit = $4.55 per metric ton

Since the ending WIP is only 65% complete with respect to conversion costs, we need to multiply the cost per equivalent unit by 1.54 to get the cost per transferred unit.
Cost per Transferred Unit = $4.55 x 1.54
Cost per Transferred Unit = $6.9997 or $7.00 (rounded)

Therefore, the cost per equivalent unit for the units transferred to the Boiling process is $377.30 per metric ton.

Organic Sugar Company at Ohio Has Six Processing Departments for Refining