Question 4 Icy Delight Company, which manufactures quality ice cream sold at premium prices, uses a single production department. Production begins with the blending of various ingredients, which are added at the beginning of the process, and ends with the packaging of the ice cream. Packaging occurs when the mixture reaches the 90% stage of completion. The two-litre cartons are then transferred to the shipping department for shipment. Labour and overhead are added continuously throughout the process. Manufacturing overhead is applied on the basis of direct labour hours at the rate of $3 per hour. The company has always used the weighted average method to determine equivalent units of production and unit costs. Now, production management is considering changing from the weighted average method to the first-in, first-out method. The following data relate to actual production during the month of May: Costs Work in process inventory, May 1 (16,000 litres; 15% complete) Direct materials (ingredients) Direct labour ($10 per hour) Manufacturing overhead $45,600 6,250 1,875 Costs Incurred Direct materials ingredients) $228,400 Direct materials (cartons) 7,000 Direct labour ($10 per hour) 35,000 Manufacturing overhead 10,500 Production Units Litres Work in process inventory, May 1 (15% complete) 16,000 Started in May 84,000 Sent to shipping department 80,000 Work in process inventory, May 31 (95% complete) 20,000 Calculate the cost per equivalent unit for each cost element for the month of May using (1) the weighted-average method, and (2) the first-in, first-out method. (Round answers to 2 decimal places, e.g. 52.75.) (1) Weighted Average Material 1 Material 2 Conversion Costs Cost per equivalent unit (2) First-in, first-out Material 1 Material 2 Conversion Costs Cost per equivalent unit (1) Weighted Average Equivalent Units Material 2 Conversion Costs Physical Units Material 1 Quantities Units to be accounted for Work in process, beginning 16000 Started in May 84000 Total units 100000 Units accounted for Completed 80000 80000 80000 80000 Work in process, ending 20000 Material 1 20000 Material 2 20000 Conversion 19000 Total equivalent units 100000 100000 100000 99000 (2) First-in, first-out Physical Units Equivalent Units Material 2 Conversion Costs Material 1 Quantities Units to be accounted for Work in process, beginning 16000 Started in May 84000 Total units 100000 Units accounted for Work in process, beginning 16000 Material 1 Material 2 16000 Conversion 13600 Started and completed 64000 64000 64000 64000 Work in process, ending 20000 Material 1 20000 Material 2 20000 Conversion 19000 Total equivalent units 100000 84000 100000 96600