Question

g Sparky Corporation uses the weighted-average method of process costing. The following information is available for February in its Molding Department: Units: Beginning Inventory: 27,000 units, 100% complete as to materials and 55% complete as to conversion. Units started and completed: 114,000. Units completed and transferred out: 141,000. Ending Inventory: 31,000 units, 100% complete as to materials and 30% complete as to conversion. Costs: Costs in beginning Work in Process - Direct Materials: $45,000. Costs in beginning Work in Process - Conversion: $50,850. Costs incurred in February - Direct Materials: $311,160. Costs incurred in February - Conversion: $601,150. Calculate the cost per equivalent unit of conversion. Group of answer choices $4.76 $3.96 $5.29 $4.34 $5.69

Answer 1

Answer:

Conversion cost per equivalent unit = $4.76

Explanation:

Conversion cost per equivalent unit = Total conversion cost / Equivalent units

Conversion cost is the sum of the direct labour cost and the factory overhead cost.  

Equivalent units are notional whole units which represent incomplete work and are used to apportion cost between work progress and completed work. These units are determined as follows:  

Equivalent units = Degree of work done(%) × units of inventory

Equivalent units

Item                           Unit                                            Equivalent unit

Completed unit         140,000         140000× 100%      140,000

Closing inventory      31,000             31,000× 30%         9,300

Total equivalent unit                                                       149,300

Completed units = opening inventory + units started in the period - closing inventory

Completed units = 27000 + 114,000 - 31,000 = 140,000

The conversion cost = 50,850  + 601,150 = 652,000  

conversion cost per equivalent unit = 652,000 /140,000 = 4.65

Conversion cost per equivalent unit = $4.76