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Find Out the Cost per Unit
Material A is added at the start of a production process. Overheads and Labor are added continuously throughout the production process. At the ending of the process, 10,000 units were complete and 2,000 units were 60 percent complete as per overheads and labor. The cost of raw materials employed throughout the period amounted to shs.220, 000, labour shs.150, 000 and overheads shs.74, 000. There was no opening inventory.
Required
Find out the cost per unit of both the completed units, and the units in the end inventory.
Solution
Physical Units
Materials
Conversion (direct Labour and overheads
Completed
10,000
Ending Inventory
2,000
1, 200
12,000
______
_______
Equivalent Units
11,200
Cost for the Period
220,000
224,000
Cost per Equivalent Unit:
Shs.18.33
220,000/1,200=sh18.33 224,000/11,200=sh20
Total Cost/Equivalent Unit
=18.33+sh.38.33
In the above illustrations, there is no opening work in process. When it exists, we need to adopt a method of valuing it and incorporating it into the process accounts.
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