Q.18-15RQ - Horngren'S Financial And Managerial Accounting

Question

Question: How is the cost per equivalent unit of production calculated?

Step-by-Step Solution

Answer

Answer: 

The cost per equivalent unit of production is calculated by dividing the total cost with the Equivalent unit of production.

Step 1: Equivalent unit of production

Equivalent unit of production helps the company to measure the direct material, labor and manufacturing overhead incurred on partially finished group of units during the period and to be expressed as fully completed units of output.

Step 2: Formula to compute the cost per equivalent unit of production

$\mathit{C}\mathit{o}\mathit{s}\mathit{t}\mathbf{ }\mathit{p}\mathit{e}\mathit{r}\mathbf{ }\mathit{e}\mathit{q}\mathit{u}\mathit{a}\mathit{l}\mathit{e}\mathit{n}\mathit{t}\mathbf{ }\mathit{u}\mathit{n}\mathit{i}\mathit{t}\mathbf{ }\mathit{o}\mathit{f}\mathbf{ }\mathit{p}\mathit{r}\mathit{o}\mathit{d}\mathit{u}\mathit{c}\mathit{t}\mathit{i}\mathit{o}\mathit{n}\mathbf{=}\frac{\mathbf{T}\mathbf{o}\mathbf{t}\mathbf{a}\mathbf{l}\mathbf{ }\mathbf{cos}\mathbf{t}\mathbf{ }\mathbf{(}\mathbf{D}\mathbf{i}\mathbf{r}\mathbf{e}\mathbf{c}\mathbf{t}\mathbf{ }\mathbf{m}\mathbf{a}\mathbf{t}\mathbf{e}\mathbf{r}\mathbf{i}\mathbf{a}\mathbf{l}\mathbf{ }\mathbf{o}\mathbf{r}\mathbf{ }\mathbf{c}\mathbf{o}\mathbf{n}\mathbf{v}\mathbf{e}\mathbf{r}\mathbf{s}\mathbf{i}\mathbf{o}\mathbf{n}\mathbf{ }\mathbf{cos}\mathbf{t}\mathbf{)}}{\mathbf{E}\mathbf{q}\mathbf{u}\mathbf{a}\mathbf{l}\mathbf{e}\mathbf{n}\mathbf{t}\mathbf{ }\mathbf{u}\mathbf{n}\mathbf{i}\mathbf{t}\mathbf{ }\mathbf{o}\mathbf{f}\mathbf{ }\mathbf{p}\mathbf{r}\mathbf{o}\mathbf{d}\mathbf{u}\mathbf{c}\mathbf{t}\mathbf{i}\mathbf{o}\mathbf{n}\mathbf{ }\mathbf{f}\mathbf{o}\mathbf{r}\mathbf{ }\mathbf{(}\mathbf{D}\mathbf{i}\mathbf{r}\mathbf{e}\mathbf{c}\mathbf{t}\mathbf{ }\mathbf{m}\mathbf{s}\mathbf{t}\mathbf{e}\mathbf{r}\mathbf{i}\mathbf{a}\mathbf{l}\mathbf{ }\mathbf{o}\mathbf{r}\mathbf{ }\mathbf{p}\mathbf{r}\mathbf{o}\mathbf{d}\mathbf{u}\mathbf{c}\mathbf{t}\mathbf{i}\mathbf{o}\mathbf{n}\mathbf{ }\mathbf{cos}\mathbf{t}\mathbf{)}}$