Pablo Company calculates the cost for an equivalent unit of production using costing. Data For June

Work in process inventory, June 1: 30,000 units
Direct materials: 100% complete 60,000
Conversation: 40% complete 25,000
Balance in work process 85,000
Units started during June 70,000
Units completed and transferred out 70,000
Work in process inventory, June 30 30,000
Direct materials: 100% complete
Conservation: 80% complete
Costs incurred during June
Direct materials 122,500

Conversation costs:
Direct labor 119,720
Applied overhead 179,580
Total conversation costs 299,300

Required:
Compute the costs per equivalent unit for both the weighted- average and FIFO methods

The computation of the costs per equivalent unit under the weighted-average and FIFO methods are as follows:

                                              Weighted-Average                      FIFO

                                            Direct        Conversion      Direct       Conversion

                                          Materials         Costs          Materials         Costs

Cost per equivalent unit   $1.825          $3.45           $2.607        $3.955

Data and Calculations:

Work in process inventory, June 1: 30,000 units

Direct materials: 100% complete $60,000

Conversion: 40% complete $25,000

Balance in work process = $85,000

Units started during June 70,000

Units completed and transferred out 70,000

Work in process inventory, June 30 30,000

Direct materials: 100% complete

Conversion: 80% complete

Costs incurred during June

Direct materials = $122,500

Conversion costs:

Direct labor = $119,720

Applied overhead = $179,580

Total conversation costs = $299,300

Total Costs of Production:

                                                 Direct            Conversion        Total

                                                Materials             Costs            Costs

Beginning inventory               $60,000              $25,000      $85,000

Costs added during period    122,500               299,300       421,800

Total costs of production     $182,500             $324,300   $506,800

Equivalent units of production (weighted-average)

                                                 Physical       Direct            Conversion

                                                   Units       Materials               Costs

Beginning inventory               30,000        0                                0

Units transferred out              70,000     70,000 (100%)    70,000 (100%)

Ending inventory                    30,000     30,000 (100%)    24,000 (80%)

Total equivalent units                           100,000               94,000

Cost per equivalent unit                        $1.825                  $3.45

                                                    ($182,500/100,000)   ($324,300/94,000)

Equivalent units of production (FIFO)

                                                 Physical       Direct            Conversion

                                                   Units       Materials               Costs

Beginning inventory               30,000        0                       18,000 (60%)

Units started & completed     40,000     40,000 (100%)    40,000 (100%)

Ending inventory                    30,000     30,000 (100%)    24,000 (80%)

Total equivalent units                            70,000                82,000

Cost per equivalent unit                       $2.607                $3.955

                                                    ($182,500/70,000)   ($324,300/82,000)

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$5.275 & $5.40

Explanation:

According to the scenario, computation of the given data are as follows:

Weighted Average Method :

Units                                        Physical                   Direct             Conversion

Completed & transferred       70,000                  70,000            70,000

Ending WIP                             30,000                   30,000            24,000

                                                                                                   ( 30,000 × 80%)  

Equivalent production Unit     100,000                100,000            94,000

So, Cost per equivalent unit under weighted average method can be calculated as:

                Direct material                    Conversion                Total cost

                    $1.825                                $3.45                          $5.275  

        (60,000 + 122,500)             (25000+299300)

     = (182,500 ÷ 100.000)         =(324300 ÷ 94,000)                      

FIFO Method

Units                                        Physical                 Direct             Conversion

Beginning WIP                         30,000                    0                        18,000

                                                                      (30,000 × 0%)        (30,000 × 60%)

Started & completed               40,000              40,000                   40,000

Ending WIP                               30,000              30,000                   24,000

                                                                                                        (30,000 × 80%)

Equivalent production Unit     100,000            70,000                 82,000

So, Cost per equivalent unit under FIFO method can be calculated as:

                Direct material                    Conversion                  Total cost

                    $1.75                                    $3.65                          $5.40

         (122,500 ÷ 70,000)             (299,300 ÷ 82,000)

an online clothing brand

explanation:

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