This is a simple managerial accounting question, using FIFO process costing to compute the cost per equivalent unit for each product cost category.

Question

 

Universal S.E.A Ltd (“USea”) uses process costing and FIFO (First-In-First-Out) cost flow systems. Products are processed sequentially in department G and department K before transfer to the finished goods warehouse. Given below is cost information for department K for the month of July 2015:

 

Work in process (WIP), 1 July 2015		$69,000
Cost of units transferred in from department G during July		$358,450
Manufacturing costs added in department K during July
Direct materials used	$195,810
Conversion costs	$399,288	$595,098
Total manufacturing costs, department K		$1,022,548

 

The cost of WIP in department K at 1 July was $69,000, which consisted of 8,000 units that were 90% complete. During July, a total of 107,000 units were started and 99,000 units were completed and transferred out. At the end of July, 10,000 units remained uncompleted. The ending WIP inventory was 50% complete.

 

In department K, direct material and transferred-in costs are added at the beginning of the manufacturing process whilst conversion costs are incurred evenly throughout the manufacturing process. Inspection in department K takes place when the products are 80% complete. Normal spoilage is set at 4% of good units produced.

 

Required:

 

(a)                Compute the cost per equivalent unit for each product cost category in department K for the month of July 2015.