Question

A department adds materials at the beginning of the process and incurs conversion costs uniformly throughout the process. For the month of July, there was no beginning work in process; 20,000 units were completed and transferred out; and there were 10,000 units in the ending work in process that were 40% complete. During July, $72,000 materials costs and $63,000 conversion costs were charged to the department.
The unit production costs for materials and conversion costs for July was

MATERIALS CONVERSION COSTS
A) 2.40 2.63
B) 3.60 3.15
C) 3.00 2.10
D) 2.40 2.10

Answer 1

Answer:

A) 2.40 2.63

Explanation:

Equivalent units Materials

As they are added entirely at the beginning so equivalent units equals the physical units:

20,000 compelted + 10,000 ending: 30,000

Equivalent units Conversion Cost

completed and transferred-out + percentage of completion ending WIP inventory

20,000 completed + 10,000 x 40% = 24,000

Unit cost:

Materials:

72,000 / 30,000 = 2.40

Conversion Cost:

63,000 / 24,000 =2.625