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Determine the equivalent cost per unit

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Question - Allen, the manager of the finishing department, knows exactly what he is doing. In each of the 3 years he has managed the department, the cost per unit of product transferred out of his Work in Process Inventory account has declined. His ability to control cost is highly valued. Allen estimated that the inventory was 60% complete, while Rob, the cost accounting specialist of the finishing department believed that inventory was only about 40% complete.

The finishing department of Standard Tool Company had beginning inventory of 5,500 units of product and it started 94,500 units during the period. It transferred out 90,000 units during the period. Total transferred-in and production cost for the period was $902,400. This amount included the cost in beginning inventory plus additional costs incurred during the period. The target (standard) cost per unit is $9.45.

-Determine the equivalent cost per unit, assuming that the ending inventory is considered to be 40% complete.

-Determine the equivalent cost per unit, assuming that the ending inventory is considered to be 60% complete.

-Comment on motives for establishing the percentage of completion at 60% rather than 40%.

Reference no: EM133047301

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