The following information relates to Department Z for the month of July, the sol
ID: 2562450 • Letter: T
Question
The following information relates to Department Z for the month of July, the sole processing department of Company ABC. 23,000 units (5,000 units from Beginning WIP and 18,000 units started and completed during July) were transferred out of the department to finished goods. 2,000 units remain in the department at the end of July. A calculation of equivalent units for work performed during July appears below:
Equivalent Units
Equivalent Units
Direct Materials
Labor and Overhead
Beginning WIP
0
1,500
Units started and
Completed
18,000
18,000
Ending WIP
2,000
1,600
Total
20,000
21,100
Refer to Figure 1. Assume beginning work-in-process costs from the prior month total $13,000 and that current month costs for direct materials, direct labor, and factory overhead total $18,000, $8,000, and $10,000 respectively. Department Z’s cost per equivalent unit of production for materials using the FIFO method would be
A. $.96
B. $1.04
C. $.90
D. $.10
E. $1.20
Equivalent Units
Equivalent Units
Direct Materials
Labor and Overhead
Beginning WIP
0
1,500
Units started and
Completed
18,000
18,000
Ending WIP
2,000
1,600
Total
20,000
21,100
Explanation / Answer
Answer is $ 0.90 per equivalent unit.
The explanation is as follows:
Current cost of Material $ 18,000
Material Equivalent units 20,000 Equivalent unit (processed duringthe current month)
Therefore, Material cost per Equivalent unit (18,000 /20,000 ) = $ 0.90 per equivalent unit
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