Exercise 16-6 The Cutting Department of Cassel Company has the following product

Question

Exercise 16-6

The Cutting Department of Cassel Company has the following production and cost data for July.

Production

Costs

Materials are entered at the beginning of the process. Conversion costs are incurred uniformly during the process.

(a) Determine the equivalent units of production for (1) materials and (2) conversion costs.

Materials

Conversion Costs

(b) Compute unit costs. (Round unit costs to 2 decimal places, e.g. 2.25.)

Prepare a cost reconciliation schedule.

Cost Reconciliation

Costs accounted for

   Transferred out

   Work in process, July 31

      Materials

      Conversion costs

         Total costs

Open Show Work

Production

Costs

1. Transferred out 13,500 units. Beginning work in process $0 2. Started 4,300 units that are 60% Materials 67,640 complete as to conversion Labor 21,684 costs and 100% complete as Manufacturing overhead 23,340 to materials at July 31.

Explanation / Answer

a. Total equivalent units of production Material - Started with 4300 units that were 100% complete with regard to materials as on 31st July.Therefore equivqlent units for materials = 13500 +4300 = 17,800 units.

Equivalent units for conversion cost =

4300 units , 60% completed as to conversion cost . So equivalent units for these are 60% of 4300 = 2580. Besides 100% conversion cost in 13500 units

So Equivalent units for conversion cost = 13500 + 2580 = 16080..

b) Unit cost calculation.

C. Cost Reconcilliation schedule.

Unit costs $ Units Cost / unit Material 67640 17800             3.80 Conversion 45024 16080             2.80

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