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The costs of materials consumed in producing good units in the Forming Department of Thomas Company were $76,000 and $77,350 for September and October, respectively
The costs of materials consumed in producing good units in the Forming Department of Thomas Company were $76,000 and $77,350 for September and October, respectively. The number of equivalent units produced in September and October was 800 tons and 850 tons, respectively.
Evaluate the change in the cost of materials between the two months.
Expert Solution
Evaluate the change in the cost of materials between the two months.
The cost of materials in September is the cost of materials consumed in producing good units ($76,000) / the equivalent units produced in September (800) = $95.00 per equivalent unit
The cost of materials in October is the cost of materials consumed in producing good units ($77,350) / the equivalent units produced in September (850) = $91.00 per equivalent unit
Therefore, the change in the cost of the materials between the two months is $95 - $91 = $4 reduction in cost per equivalent unit, which is a 4.2% reduction in cost.
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