Data for Balartistry Company are as follows: Units Percent Completed Direct Materials Costs Conversion Costs Beginning work in process 10,000 90% $10,000 $30,000 Units started and completed during the period 50,000 Costs added this period $110,000 $200,000 Ending work in process 20,000 30% Units completed and transferred during the period 60,000 Materials are added at the beginning of the production process. Conversion costs are added uniformly throughout the production process. Assuming a FIFO flow of costs, what is Balartistry Company’s computed total production cost per equivalent unit for work done during the period?
Balartistry Company’s computed total production cost per equivalent unit for work done during the period can be calculated by considering the costs incurred for both direct materials and conversion costs. In this case, the company uses the FIFO (First-In-First-Out) method for cost flow assumption. This method assumes that the units completed and transferred out of the production process first are from the beginning work in process, and then the units started and completed during the period. Let’s break down the calculations step by step.
The first step is to determine the number of units that were completed and transferred out during the period. In this case, it is given that 60,000 units were completed and transferred out.
To calculate the equivalent units for direct materials, we need to consider both the beginning work in process and the units started and completed during the period.
For the beginning work in process, 10,000 units were 90% completed, so the equivalent units for direct materials is 10,000 units * 90% = 9,000 equivalent units.
For the units started and completed during the period, all 50,000 units are 100% completed, so the equivalent units for direct materials is 50,000 units.
The total equivalent units for direct materials are 9,000 + 50,000 = 59,000 equivalent units.
The equivalent units for conversion costs are calculated in a similar manner.
For the beginning work in process, 10,000 units were 90% completed, so the equivalent units for conversion costs is 10,000 units * 90% = 9,000 equivalent units.
For the units started and completed during the period, all 50,000 units are 100% completed, so the equivalent units for conversion costs is 50,000 units.
The total equivalent units for conversion costs are 9,000 + 50,000 = 59,000 equivalent units.
The total production cost includes both direct materials costs and conversion costs. From the given information, direct materials costs added this period amount to $110,000, and conversion costs added this period amount to $200,000.
To find the cost per equivalent unit, we divide the total production cost by the total equivalent units for each cost component:
Cost per equivalent unit for direct materials = Total direct materials cost / Total equivalent units for direct materials
Cost per equivalent unit for conversion costs = Total conversion costs / Total equivalent units for conversion costs
Substituting the values:
Cost per equivalent unit for direct materials = $110,000 / 59,000 equivalent units
Cost per equivalent unit for conversion costs = $200,000 / 59,000 equivalent units
Now, we can calculate the actual cost per equivalent unit for both direct materials and conversion costs. These costs are essential for further financial analysis and decision-making within the company.
In conclusion, Balartistry Company’s computed total production cost per equivalent unit for work done during the period, under the FIFO cost flow assumption, is obtained by considering the equivalent units for direct materials and conversion costs. This information is crucial for cost allocation and inventory valuation, aiding the company in assessing its production efficiency and making informed financial decisions.
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