1. Direct materials cost per equivalent unit.
2. Conversion cost per equivalent unit.
3. Cost of the beginning work in process completed during July.
4. Cost of units started and completed during July.
5. Cost of the ending work in process.
b. Assuming that the direct materials cost is the same for June and July, did the conversion cost per equivalent unit increase, decrease, or remain the same in July?
Answer:
a. 1. $1.90 ($307,800 ÷ 162,000 units)
2. $0.40 [($43,600 + $21,104) ÷ 161,760 units]
3. $18,496, determined as follows:
Work in Process—Baking Department balance, July 1…………………… $16,576
Conversion costs incurred during July
(4,800 equivalent units × $0.40)…………………………………………… 1,920
Cost of beginning work in process completed during July……………… $18,496
4. $343,620 [($1.90 + $0.40) × 149,400 units]
Note to Instructors: The cost of the beginning work in process completed
during July, $18,496 (a. 3), plus the cost of the units started and completed
during July, $343,620 (a. 4), equals the cost of the units finished during July,
$362,116.
5. $26,964, determined as follows:
Direct materials ($1.90 × 12,600 units)……………………………………… $23,940
Conversion costs ($0.40 × 7,560 equivalent units)……………………… 3,024
Cost of ending work in process……………………………………………… $26,964
Note: The cost of the ending work in process is also the balance of Work in
Process—Baking Department as of July 31.
b. The conversion costs in July decreased by $0.03 per equivalent unit,
determined as follows:
Work in Process—Baking Department balance, July 1……………………… $16,576
Deduct direct materials cost incurred in June
($1.90 × 8,000 units, same cost per unit as July)……………………………… 15,200
Conversion costs incurred in June $ 1,376
June conversion cost per equivalent unit
[$1,376 ÷ (8,000 units × 2/5)]……………………………………………………. $ 0.43
July conversion cost per equivalent unit………………………………………… $ 0.40
Less June conversion cost per equivalent unit………………………………… 0.43
Decrease in conversion cost per equivalent unit………………………………… $(0.03)