Pitt Enterprises manufactures jeans. All materials are introduced at the beginni
ID: 2488808 • Letter: P
Question
Pitt Enterprises manufactures jeans. All materials are introduced at the beginning of the manufacturing process in the Cutting Department. Conversion costs are incurred uniformly throughout the manufacturing process. As the cutting of material is completed, the pieces are immediately transferred to the Sewing Department. Information for the Cutting Department for the month of May follows. Work in Process, May 1 (50,000 units, 100% complete for direct materials, 40% complete with respect to conversion costs; includes $70,500 of direct material cost; $34,050 of conversion costs). Work in Process, May 31 (75,000 units, 100% complete for direct materials; 20% complete for conversion costs). If Pitt Enterprises uses the FIFO method of process costing, compute the cost per equivalent unit for direct materials and conversion costs respectively for May.Explanation / Answer
Direct Material Cost for the Month of May= 3,42,000$
Total units processed out of direct Material=225000
Since FIFO method is applied, direct material cost will be calculated on the basis of recent purchase cost.
Material Cost per unit= 342000$/225000=1.52$
Conversion cost=352950$
Equivalent units for conversion cost
Opening WIP=50000x60%=30000
Production=(200000-50000)x100%=150000
Closing WIP=75000x20%=15000
Total=195000units
Cost per unit=352950$/195000=1.81$
Answer is 1st Option- 1.52$, 1.81$