Question

The Finishing Department reports the following data for the month:

Equivalent unit of production:

Transferred in	3,000
Direct materials	3,000
Conversion cost	2,250

Costs:	Beginning WIP	Added this month	Total
Transferred in	\(7,500	\)15,000	\(22,500
Direct materials	3,250	6,500	9,750
Conversion costs	6,125	13,000	19,125
Total	\)16,875	\(34,500	\)51,375

Calculate the cost per equivalent units of production for each input. The company

uses the weighted-average method.

Short answer

The cost per equivalent unit of production for transferred-in is $7.50, for direct materials is $3.25, and conversion cost is $8.5.

Step-by-step solution

Step-by-Step Solution:Step 1: Conversion Cost

Conversion cost is incurred by a company while manufacturing finished goods from the raw material. The Sum of direct labor and the manufacturing overhead cost is called conversion cost.

Cost per equivalent unit of production (EUP) for transferred in units

$$\begin{gathered} \mathbf{Cost}\mathbf{}\mathbf{per}\mathbf{}\mathbf{EUP}\mathbf{}\mathbf{for}\mathbf{}\mathbf{transferred}\mathbf{}\mathbf{in}\mathbf{=}\frac{\mathrm{Total}\mathrm{cost}\mathrm{of}\mathrm{transferred}\mathrm{in}\mathrm{units}}{\mathrm{Equivalent}\mathrm{units}\mathrm{of}\mathrm{production}\mathrm{for}\mathrm{transferred}\mathrm{in}} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\frac{\$22,500}{3,000} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{7}\mathbf{.}\mathbf{5} \end{gathered}$$

Cost per equivalent unit of production for direct materials

$$\begin{gathered} \mathbf{Cost}\mathbf{}\mathbf{per}\mathbf{}\mathbf{EUP}\mathbf{}\mathbf{for}\mathbf{}\mathbf{Direct}\mathbf{}\mathbf{materials}\mathbf{=}\frac{\mathrm{Total}\mathrm{directmaterial}\mathrm{costs}}{\mathrm{Equivalent}\mathrm{units}\mathrm{of}\mathrm{production}\mathrm{for}\mathrm{Directmaterial}} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\frac{\$9,750}{3,000} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{3}\mathbf{.}\mathbf{25} \end{gathered}$$

Cost per equivalent unit of production for conversion cost

$$\begin{gathered} \mathbf{Cost}\mathbf{}\mathbf{per}\mathbf{}\mathbf{EUP}\mathbf{}\mathbf{for}\mathbf{}\mathbf{Conversion}\mathbf{}\mathbf{costs}\mathbf{=}\frac{\mathrm{Total}\mathrm{Conversion}\mathrm{costs}}{\mathrm{Equivalent}\mathrm{units}\mathrm{of}\mathrm{production}\mathrm{for}\mathrm{conversion}\mathrm{costs}} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\frac{\$19,125}{2,250} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{8}\mathbf{.}\mathbf{50} \end{gathered}$$