The materials cost was calculated only using the number of units that apply to each product (1,000 for cotton, and 1,500 for polyester). Since all the materials were added to the 1,500 dresses, it cost $15 per unit for materials ($22,500/1,500 dresses).
The conversion costs are not broken up between each product, so it applies to both cotton and polyester dresses. So, you have to compute the equivalent units.
Similar to what Eriko computed, all of the cotton dresses were 100%, as well as 700 polyester dresses. The remaining 800 dresses were 25% done, which creates 200 equivalent units (800*.25). 1,000 cotton + 700 polyester + 200 equivalent polyester units = 1,900 equivalent conversion units. ($13,300) / 1,900 dresses = $7 per unit for conversion.
7+15=22 per unit.
Another thing to note, since there were no units in Beginning WIP, there is no difference between the weighted average and FIFO method.
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Nicholas Tsirigos
Other
Brooklyn NY
United States
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Original Message:
Sent: 05-08-2019 09:25 AM
From: Faisal Khaleel
Subject: Part 1 Costing systems MCQ
Can Anyone help me with Equivalent Units Calculation? How is it 1900 units when the total units started are 1500...?
Fashion Inc. manufactures women's dresses using cotton and polyester. Since the same style dresses are made out of both fabrics, Fashions uses operation costing. During June, 1,000 cotton dresses were completely produced. Also during June, 1,500 polyester dresses were started by adding all materials at the beginning of the process. Of these 1,500 dresses, 700 were completely finished and the remainder were 25 percent complete by the end of the month. There was no work-in-process inventory at the beginning of June. Costs incurred during June were as follows.
The cost per unit to manufacture one polyester dress during June was:
| $20.32. |
| $32.00. |
| $22.00. |
| $18.32. |
The cost to manufacture one polyester dress in June is calculated as follows:
Cost to manufacture, one dress = (raw material cost per dress) + (conversion cost per dress)
Raw material cost per dress = ($22,500/1,500 dresses) = $15
Conversion cost per dress = ($13,300) / (equivalent unit of conversion incurred in June)
Equivalent units of conversion in June = (1,700 dresses started and finished) + (800 started multiplied by a 25% completion rate)
Equivalent units of conversion in June = (1,700) + (200) = 1,900 dresses
Therefore, the conversion cost per polyester dress = ($13,300) / 1,900 dresses = $7 per dress.
Cost to manufacture, one dress = ($15 + $7) = $22.
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Faisal Khaleel
Bangalore
India
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