Question

The cost of direct materials transferred into the Bottling Department of the Mountain Springs Water Company is $672,000. The conversion cost for the period in the Bottling Department is $365,000. The total equivalent units for direct materials and conversion are 33,600 liters and 7,300 liters, respectively. Determine the direct materials and conversion cost per equivalent unit.

Answer 1

Cost per equivalent unit of materials=20 per unit

Cost per equivalent unit of conversion=50 per unit

Step-by-step explanation:

The cost of direct materials in Mountain spring water company is $672,000

The conversion cost for that period in the bottling company is $365,000

The total equivalent unit for direct materials is 33,600 liters

The total equivalent unit for conversion is 7,300 liters

The cost per equivalent unit of materials can be calculated as follows

= Cost of direct materials/total equivalent unit for direct materials

= $672,000/33,600 liters

= 20 per unit

The cost per equivalent unit of conversion can be calculated as follows

= Conversion cost/total equivalent unit of conversion

= $365,000/7,300liters

= 50 per unit

Hence the cost per equivalent unit of materials is 20 per unit and the cost per equivalent unit of conversion is 50 per unit.