The following information is available for a production process for the last period:
Material input
200 kg at $4 per kg
Labour input
100 hours at $15 per hour
Department overhead
$1,000
Transfer to finished goods
150 kg
Normal loss is 10% of input. Losses are identified when the process is 50% complete.
There is no opening or closing work-in-progress.
The total cost of a completed unit is:
A $22.00
B $20.48
C $19.59
D $18.33
answer: C
Hello. I'm wondering why equivalent units for Material was 30units but Conversion costs were 15units. Shouldn't both have been 15units given the 50% completion.
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Abnormal loss 50% completed
3y ago#1Given that the normal loss is 10% of input they expect to produce 180kg and the costing are done on the expected production.
As far as the material is concerned, it is complete as soon as the material is input. Therefore the material cost per unit is spread over the expected production of 180.
As far as the labour and overheads are concerned, the total cost is (100 x $15) + $1,000 = $2,500. Given that losses are only identified when they are 50% complete, then half the cost is spread over the expected production of 180, whereas the other half of the cost is only spent on the actual production of 150.
Thank you sir!
3y ago#3You are welcome :-)
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