Question

A company uses the weighted average method for inventory costing. At the start of a period the production department had 48,000 units in beginning Work in Process inventory which were 36% complete; the department completed and transferred 171,000 units. At the end of the period, 18,000 units were in the ending Work in Process inventory and are 71% complete. The production department had conversion costs in the beginning work in process inventory of $93,000 and total conversion costs added during the period are $726,700. Compute the conversion cost per equivalent unit.

Answer 1

Answer:

the conversion cost per equivalent unit is $4.46.

Explanation:

Step 1 : Computation of equivalent units of production for conversion costs

Units completed and transferred (171,000 × 100%)   =  171,000

Units in the ending work in process (18,000 × 71%)  =   12,780

Equivalent units of production for conversion costs = 183,780

Step 2: Determine the Total Cost of Conversion incurred during the period

Conversion Costs in Opening Work In Process           =  $93,000

Add conversion costs added during the period           = $726,700

Total Cost of Conversion incurred during the period   = $819,700

Step 3 : Calculate the conversion cost per equivalent unit.

Conversion cost per equivalent unit = Total Cost of Conversion ÷ Equivalent units of production

                                                            = $819,700 ÷ 183,780

                                                            = $4.46