United Dominion Manufacturing Co. produces a wood refinishing kit that sells for $17.95. The final processing of the kits occurs in the packaging department. A quilted wrap is applied at the beginning of the packaging process. A compartmented outside box printed with instructions and the company's name and logo is added when units are 70% through the process. Conversion costs, consisting of direct labour and applied overhead, occur evenly throughout the packaging process. Conversion activities after the completion of the box include package sealing, testing for leakage, and final inspection. The following data are for the packaging department's activities during the month of October:
1. Beginning work in process inventory was 10,000 units, 60% complete in terms of conversion costs.
2. During the month, 40,000 units were transferred to packaging.
3. There were 10,000 units in ending work in process, 70% complete in terms of conversion costs.
The packaging department's October costs were as follows:
Quilted wrap .............................................................. $80,000
Outside boxes ............................................................. 50,000
Direct labour ............................................................... 22,000
Applied overhead ($3.00/per direct-labour dollar) .................. 66,000
The costs transferred in from prior processing were $3.00 per unit. The cost of goods sold for the month was $240,000, and the ending finished goods inventory was $84,000. United Dominion Manufacturing Co. uses the FIFO method for process costing.
Instructions
(a) PrepareascheduleofequivalentunitsfortheOctoberactivityinthepackagingdepartment.
(b) Determine the cost per equivalent unit for the October production.
(Adapted from CMA Canada, now CPA Canada)