Badgersize Company has the following information for its Forming Department for

Question

Badgersize Company has the following information for its Forming Department for the month of August.

Assume materials are added at the start of processing.

Required:

a. Calculate the equivalent units for the Forming Department for the month of August.

b. Find the cost per equivalent unit of input resource. (Round your answers to 2 decimal places.)

Work in Process Inventory, August 1: 20,000 units Direct materials: 100% complete $ 80,000 Conversion: 20% complete 24,000 Balance in work in process, August 1 $ 104,000 Units started during August 54,000 Units completed and transferred in August 59,000 Work in process (70% complete), August 31 ? Costs charged to Work in Process in August Direct materials $ 165,000 Conversion costs: Direct labor $ 113,000 Overhead applied 149,000 Total conversion $ 262,000

Explanation / Answer

Answer:

a. Calculate the equivalent units for the Forming Department for the month of August.

Direct Materials

Conversion

  Total equivalent units in August

54000

65500

Working notes for the answer:

Direct Materials

Conversion

  Input resources required

  To finish beginning inventory, August 1:

     Direct materials (20,000 units require 0% to complete)

0

     Converson (20,000 units require 80% to complete)

16000

  To start and complete 38,000 units in August*

39000

39000

  To start ending inventory in process on August 31:**

     Direct materials (15,000 units 100% complete)

15000

     Conversion (15,000 units 70% complete)

10500

  Total equivalent units in August

54000

65500

1

*59,000 units transferred – 20,000 units in beginning inventory = 39,000 units started and completed.

2

**20,000 units in beginning inventory + 54,000 units started – 59000 units transferred = 14,000 units in ending inventory.

_______________________________________________________

b. Find the cost per equivalent unit of input resource.

Direct Materials

Conversion

  Total cost incurred in August

165000

262000

  Equivalent units consumed in August (see part a.)

÷ 54,000

÷ 65,500

  Cost per equivalent unit in August

3.06

4.00

Direct Materials

Conversion

  Total equivalent units in August

54000

65500

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