Equivalent Units and Cost per Equivalent Unit-Weighted-Average Method [LO5-2, LO5-3] Pureform, Inc., uses the weighted-average method in its process costing system. It manufactures a product that passes through two departments. Data for a recent month for the first department follow:
Units Materials Labor Overhead
Work in process inventory, beginning 58,000 $ 56,200 19,700 $24,100
Units started in process 549,000
Units transferred out 570,000
Work in process inventory, ending 37,000
Cost added during the month $ 743,270 $ 243,460 $297,540
The beginning work in process inventory was 80% complete with respect to materials and 65% complete with respect to labor and overhead. The ending work in process inventory was 60% complete with respect to materials and 40 % complete with respect to labor and overhead.
Required:
1. Compute the first department's equivalent units of production for materials, labor, and overhead for the month.
2. Determine the first department's cost per equivalent unit for materials, labor, and overhead for the month. (Round your answers to 2 decimal places.)
Overhead Labor Materials
1. Equivalent units of production
2. Cost per equivalent unit

                                                                 Material      Labour          Overhead

1) Total equivalent unit                         607,000           584,800         584,800

2) Cost per equivalent unit (a/b)              1.32               0.45          0.55  

Explanation:

Under the weighted average method of valuation, to account for completed units, it is assumed that the entire degree of work required is done in the period under consideration. So there is no separation of the completed units into opening inventory and fully worked.

Cost per equivalent unit = cost / total equivalent units  

1) Equivalent units of production

                                                            Material      Labour          Overhead

                                       Unit              EU                 EU                   EU          

Transferred out           570,000      570,000       570,000          570,000

Work in progress         37,000        22,200       14,800                    14,800

Total equivalent unit                        607,000           584,800         584,800

% of work done on WIP                    60%                   40%               40%

Note the  equivalent unit for WIP is computed by multiplying the degree of work done (in %) by the units of WIP for each of the element of cost.

For example, the EU of material for WIP = 60% × 37,000 = 22,200

2. Cost per equivalent unit

                                                              $               $                  $

Cost brought forward                       56,200      19,700         24,100

Cost incurred and added                743,270      243,460      297,540

Total cost (a)                                     799,470263,160       321,640

Total equivalent unit(b)                     607,000     584,800      584,800

Cost per equivalent unit (a/b)               1.32     0.45          0.55  

Cost per equivalent unit = Total cost / total equivalent units  

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