Question

Fanning Ski Company manufactures snow skis. During the most recent accounting period, the company's finishing department transferred 4,200 sets of skis to finished goods. At the end of the accounting period, 490 sets of skis were estimated to be 50 percent complete. Total product costs for the finishing department amounted to $311,150.

Determine the cost per equivalent.

Answer 1

The cost per equivalent unit is calculated by dividing the total product costs by the equivalent units of production. In this case, the cost per equivalent unit would be $72.95.

Step-by-step explanation:

The cost per equivalent unit is calculated by dividing the total product costs by the equivalent units of production. To determine the equivalent units of production, we need to consider the units transferred out and the units in ending work in process inventory.

For the transferred units, the cost per unit is the total product costs divided by the number of units transferred out. In this case, 4,200 sets of skis were transferred out and the total product costs were $311,150. Therefore, the cost per unit is $311,150 / 4,200 = $74.18.

For the units in ending work in process inventory, we need to consider the percentage of completion. If 490 sets of skis are estimated to be 50 percent complete, then the equivalent units for these units would be 490 * 0.5 = 245 units. Therefore, the cost of the equivalent units for the units in ending work in process inventory would be 245 * $74.18 = $18,148.10.

Finally, to determine the cost per equivalent unit, we add the cost per unit for the transferred units and the cost of the equivalent units for the units in ending work in process inventory, and divide by the total equivalent units. In this case, the total equivalent units would be 4,200 + 245 = 4,445 units. Therefore, the cost per equivalent unit would be ($311,150 + $18,148.10) / 4,445 = $72.95.