Question

The production department of a company uses Process Costing and has no work in progress at the beginning of the period.

The company starts manufacturing 200 units, half of which are completed during the period. The total cost incurred during the period amounts to $20,000, with the equivalent units of production calculated as 180 units. What is the cost per equivalent unit for the period, and what is the total cost of the completed units?

Answer 1

The cost per equivalent unit is $111.11, calculated using the total cost of $20,000 divided by the equivalent units of 180. The total cost for the 100 completed units is $11,111, obtained by multiplying the cost per equivalent unit by the number of completed units.

Step-by-step explanation:

To calculate the cost per equivalent unit for the period, we divide the total cost incurred by the equivalent units of production. In this scenario, the total cost is $20,000 and the equivalent units are 180. Therefore, the cost per equivalent unit is calculated by the formula: AC = TC / Q, which results in $20,000 / 180 = $111.11 per equivalent unit.

The total cost of the completed units can be found by multiplying the cost per equivalent unit with the number of completed units. Since half of the 200 units started are completed, we have 100 completed units. Multiplying 100 by the cost per equivalent unit ($111.11) results in a total cost of 100 * $111.11 = $11,111 for the completed units.