Wood Glow Manufacturing Company produces a single product, a wood refinishing kit that sells for $17.95. The
Question:
Wood Glow Manufacturing Company produces a single product, a wood refinishing kit that sells for $17.95. The final processing of the kits occurs in the packaging department. An internal quilted wrap is applied at the beginning of the packaging process. A compartmentalized outside box printed with instructions and the company’s name and logo is added when the units have completed 60 percent of the process. Conversion costs consisting of direct labor and applied overhead occur evenly throughout the packaging process. Conversion activities after the addition of the box involve package sealing, testing for leakage, and final inspection. Rejections in the packaging department are rare and can be ignored. The following data pertain to the packaging department’s activities during the month of October.
• Beginning work-in-process inventory was 10,000 units, 40 percent complete as to conversion costs.
• During the month, 30,000 units were started and completed.
• Ending work-in-process had 10,000 units, 80 percent complete as to conversion costs.
The packaging department’s October costs follow:
Quilted wrap ................$80,000
Outside boxes ............... 50,000
Direct labor ................ 22,000
Applied overhead ($3 per direct labor dollar) ..... 66,000
The costs transferred in from prior processing were $3 per unit. The cost of goods sold for the month was $240,000, and the ending finished-goods inventory was $84,000. Wood Glow uses the first-in, first-out (FIFO) method of inventory valuation. Wood Glow’s controller, Mark Brandon, has been asked to analyze the packaging department’s activities for the month of October. Mark knows that to properly determine the department’s unit cost of production, he must first calculate the equivalent units of production.
Required
1. Prepare an equivalent units of production schedule for the packaging department’s October activity.
2. Determine October production’s cost per equivalent unit.
Step by Step Answer:
Cost management a strategic approach
ISBN: 978-0073526942
5th edition
Authors: Edward J. Blocher, David E. Stout, Gary Cokins