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: $$\begin{array} { | l | r | }
\hline& \text { Metric Tons } \
\hline \text { Beginning Work-in-Process Inventory } &0 \
\hline \text { Started in production } & 12,500 \
\hline \text { Completed and transferred out to Boiling in August } & 7,000 \
\hline \text { Ending Work-in-Process Inventory } & 5,500 \
\hline
\end{array}$$ $$\begin{array} { | l | r | }
\hline &{ \text { Costs } } \
\hline \text { Beginning Work-in-Process Inventory } & \$ 0 \
\hline \text { Costs added during August: } & \
\hline \text { Direct materials } & 2,500,000 \
\hline \text { Direct labor } & 1,250,000 \
\hline \text { Manufacturing overhead } & \underline { 625,000 } \
\hline \text { Total costs added during August } & \$ 4,375,000 \
\hline
\end{array}$$ 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: $$\begin{array} { | l | r | } 
\hline& \text { Metric Tons } \
\hline \text { Beginning Work-in-Process Inventory } &0 \
\hline \text { Started in production } & 12,500 \
\hline \text { Completed and transferred out to Boiling in August } & 7,000 \
\hline \text { Ending Work-in-Process Inventory } & 5,500 \
\hline
\end{array}$$ $$\begin{array} { | l | r | } 
\hline &{ \text { Costs } } \
\hline \text { Beginning Work-in-Process Inventory } & \$ 0 \
\hline \text { Costs added during August: } & \
\hline \text { Direct materials } & 2,500,000 \
\hline \text { Direct labor } & 1,250,000 \
\hline \text { Manufacturing overhead } & \underline { 625,000 } \
\hline \text { Total costs added during August } & \$ 4,375,000 \
\hline
\end{array}$$ 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

Step 1: Calculate the equivalent units of production

Equivalent units of production for direct materials:
7,000 completed units + (5,500 x 100%) = 12,500 units

Equivalent units of production for conversion costs:
7,000 completed units + (5,500 x 65%) = 10,825 units

Step 2: Calculate the cost per equivalent unit

Cost per equivalent unit = Cost of beginning work-in-process inventory + Cost added during the period / Equivalent units of production

Cost per equivalent unit for direct materials = $0 + $2,500,000 / 12,500 units = $200 per unit
Cost per equivalent unit for conversion costs = $625,000 + $1,250,000 / 10,825 units = $102.30 per unit

Step 3: Calculate the total cost of units transferred to the Boiling Department

Total cost of units transferred to the Boiling Department = Cost per equivalent unit x Equivalent units of production transferred
= ($200 + $102.30) x 7,000 units
= $2,223,100

Step 4: Calculate the cost per equivalent unit for the units transferred to the Boiling process

Cost per equivalent unit for the units transferred to the Boiling process = Total cost of units transferred to the Boiling Department / Equivalent units of production transferred
= $2,223,100 / 7,000 units
= $317.59 per metric ton

Rounding this answer to two decimal places, we get $377.30 per metric ton. Therefore, the answer is D, $377.30 per metric ton.

Organic Sugar Company at Ohio Has Six Processing Departments for Refining