ABC Inc produces product X. During December, their first month of operations, AB
ID: 2600285 • Letter: A
Question
ABC Inc produces product X. During December, their first month of operations, ABC started 85,000 kilos of X and 60,000 kilos were completed. Of the kilos in process at the end of December, they were 80% completed as to the materials and 60% as to the conversion costs. Materials used during December were $257,600 and conversion costs were $1,106.250. Compute [1] the equivalent units as to materials and conversion costs, [2] the cost per equivalent unit and [3] the cost of the ending inventory. ABC Inc produces product X. During December, their first month of operations, ABC started 85,000 kilos of X and 60,000 kilos were completed. Of the kilos in process at the end of December, they were 80% completed as to the materials and 60% as to the conversion costs. Materials used during December were $257,600 and conversion costs were $1,106.250. Compute [1] the equivalent units as to materials and conversion costs, [2] the cost per equivalent unit and [3] the cost of the ending inventory.Explanation / Answer
1) equivalent units as to materials and conversion costs
equivalent units as to materials
Units percentage completed Equivalent units
Units completed and transferred out 60,000 kilos 100% 60000
Work in process at end 25000 kilos 80% 20000
80000
equivalent units as to conversion costs
Units percentage completed Equivalent units
Units completed and transferred out 60,000 kilos 100% 60000
Work in process at end 25000 kilos 60% 15000
75000
Note:- Work in process in beginning = 0
Add: Units started in = 85,000 kilos
Total units to account for = 85,000 kilos
Units completed and transferred out = 60,000 kilos
Add: Work in process at end = 25000 kilos
Total units accounted for = 85,000 kilos
2) Direct material Conversion
Cost incurred December $257,600 $1,106.250
equivalent units 80000 75000
cost per equivalent unit $3.22 $14.75
[Cost incurred December / equivalent units]
3) cost of the ending inventory
cost of the ending inventory :
Direct material [20000 * $3.22 ] = 64400
Conversion [15000 * $14.75 ] = 221250
Total = $285650