Aditya Birla Cement Manufacturing Company: Total Cost per Equivalent Unit Calculation
What is the total cost per equivalent unit using the weighted average method?
What are the costs involved in calculating the total cost per equivalent unit?
Total Cost per Equivalent Unit Calculation
The total cost per equivalent unit using the weighted average method is an important metric in determining the overall production costs of Aditya Birla Cement Manufacturing Company. Let's dive into the calculation process to find out the total cost per equivalent unit!
Aditya Birla Cement Manufacturing Company is known for its high-quality cement used in the construction of stone buildings. The company's production process involves various stages, including work in progress and material costs.
In this scenario, the total cost per equivalent unit using the weighted average method is calculated by considering the costs incurred in both the beginning work in process and the units added during the period. The key components involved in the calculation include conversion costs and material costs.
Calculation Steps
To calculate the total cost per equivalent unit using the weighted average method, we first need to determine the equivalent units of production for both conversion and materials:
Conversion Costs:Beginning work in process: 400 units × 20% complete = 80 equivalent units
Units added during the period: 2,000 units × 40% complete = 800 equivalent units
Total equivalent units for conversion = 80 + 800 = 880 equivalent units
Material Costs:Beginning work in process: 400 units × 30% complete = 120 equivalent units
Units added during the period: 2,000 units × 50% complete = 1,000 equivalent units
Total equivalent units for materials = 120 + 1,000 = 1,120 equivalent units
Next, we calculate the total costs incurred:
Conversion Costs:Beginning work in process cost: $14,880
Costs added during the period: $409,200
Total conversion costs = $14,880 + $409,200 = $424,080
Material Costs:Beginning work in process cost: $9,900
Costs added during the period: $180,080
Total material costs = $9,900 + $180,080 = $189,980
Finally, we compute the total cost per equivalent unit:
Total cost per equivalent unit = (Total conversion costs + Total material costs) / (Total equivalent units for conversion + Total equivalent units for materials)
Total cost per equivalent unit = ($424,080 + $189,980) / (880 + 1,120)
Total cost per equivalent unit ≈ $267.85
Therefore, the correct option for the total cost per equivalent unit using the weighted average method is $26,785.