QUESTION 9 Hollywood North Magic a cosmetic manufacturer beg

QUESTION 9 Hollywood North Magic, a cosmetic manufacturer, began operations in January with 2,000 litres of product in beginning inventory that was 40% complete. The beginning inventory consisted of $1,790 of direct materials and $2,389 of conversion costs. During January $75,000 of direct materials and $95,000 of conversion costs were added to work in process. 30,000 itres of cosmetics were started and 8,000 litres were unfinished at the end of the month. Ending work-in-process was 45% All inputs are added evenly throughout the production process What is the direct materials cost per equivalent unit in January using the FIFO method. (Round to the nearest $0.01) $2.00 $3.54 $2.25 $2.80

Solution

UNITS TO ACCOUNT FOR: Beginning Work in Process units 2,000 Add: Units Started in Process 30,000 Total Units to account for: 32,000 UNITS TO BE ACCOUNTED FOR: Units completed from Beginning WIP 2000 Units started and completed 22,000 Ending Work in Process 8,000 Total Units to be accounted for: 32,000 Equivalent Units: Material Cost Conversion % Completion Units % Completion Units Units completed from Beg. WIP 60% 1,200 60% 1,200 Units started and completed 100% 22,000 100% 22,000 Ending Work in Process 45% 3,600 45% 3,600 Total Equivalent units 26,800 26,800 COST PER EQUIVALENT UNIT: Material Conversion Total cost added during the year 75,000 95,000 Equivalent Units 26,800 26,800 Cost per Equivalent unit 2.798507 3.544776 Answerr is $ 2.80 per unit