Question

Assume for August that Faust Manufacturing has manufacturing cost in BWIP equal to 80,000. During August, the cost incurred was720,000. Using the FIFO method, Faust had 120,000 equivalent units for August. What is the cost per equivalent unit for August?

Answer 1

To find the cost per equivalent unit for August, add the BWIP costs to the incurred costs, and then divide by the equivalent units, resulting in a cost of $6.67 per equivalent unit for Faust Manufacturing.

Step-by-step explanation:

To calculate the cost per equivalent unit for August using the FIFO method at Faust Manufacturing, we first sum the beginning work in process (BWIP) costs with the costs incurred during the month of August. Then, we divide this total by the number of equivalent units for the month.

Cost per Equivalent Unit Calculation:

• BWIP Costs = $80,000
• Costs Incurred = $720,000
• Total Cost = BWIP Costs + Costs Incurred = $80,000 + $720,000 = $800,000
• Equivalent Units = 120,000
• Cost per Equivalent Unit = Total Cost ÷ Equivalent Units = $800,000 ÷ 120,000 = $6.67 per unit

Therefore, the cost per equivalent unit for Faust Manufacturing for August is $6.67.