How to calculate equivalent units
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Units transferred from next dept + (Inventory ending for materials or conversion)
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Adding the units transferred out to the equivalent units from ending inventory
Journal Entry for direct labor
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Debit WIP for each dept and credit salary and wages payable
Calculating cost per equivalent unit
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WIP beginning + Cost added in Department = Total Cost
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Total cost /equivalent units = cost per equivalent unit
Ex:
20,000 units (.10%) = (7,000(beg, cost) + $244,600(cost added) = ( total cost)
Equivalent units =
units transferred + WIP ending, conversion
Cost per equivalent unit = total cost/ equivalent unit
= 244, 600/74,000 = 3.305
Calculating units transferred:
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Units transferred = Beg, inv + additional units - end, inv
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20,000 +63000 – 10,000 = 73,000 + 1,000 (end, inv conversion) = 74,000
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Equivalent units = 74,000
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Total cost /Equivalent units
4. Calculate equivalent unit
1. first calculate units transferred
5,000 + 81,000 -18,000 = 68,000 = units transferred
2. calculate WIp, ending conversion
80%
18,000 * .80 = 14,400
3. Add units transferred and WIP ending conversion
Equivalent units = 68,000 +14,400 = 82,400
(B)
5. How much conversion cost was assigned to the units transferred out of the Fitting Dept.?
Units transferred = 1,100 + 46,000 – 4,600 = 42,500
Cost per conversion = $9.24