Question

Lavalear Corporation uses a process costing system and traces costs through several processing departments, starting with the Bonding Department. Shown below is information taken from the Bonding Department’s September production cost report:
Cost Data: Bonding Department
Direct materials costs in beginning inventory, September 1 . . . . . . \$ 50,400
Conversion costs in beginning inventory, September 1 . . . . . . . . . . 36,000
Direct materials costs incurred in September . . . . . . . . . . . . . . . . . . 789,750
Conversion costs incurred in September . . . . . . . . . . . . . . . . . . . . . 787,500
Physical Units: Bonding Department
Units in process, September 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 300
Units transferred out during September . . . . . . . . . . . . . . . . . . . . . . 1,500
Units in process, September 30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500
Percentages of Completion: Bonding Department
Direct materials, September 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 40%
Conversion, September 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Direct materials, September 30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75%
Conversion, September 30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
a. Compute the cost per equivalent unit of direct materials and conversion carried forward from August and assigned to the Bonding Department’s beginning inventory on September 1.
b. Compute the cost per equivalent unit of direct materials and conversion incurred by the Bonding Department in September.
c. Discuss how the cost figures computed in parts a and b would be useful to the company’s management.

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