Asked by Terry Valentine on Jun 09, 2024
Verified
Maisley Company decided to analyze certain costs for June of the current year. Units started into production equaled 28000 and ending work in process equaled 4000. With no beginning work in process inventory how much is the conversion cost per unit if ending work in process was 25% complete and total conversion costs equaled $140000?
A) $4.40.
B) $5.00.
C) $5.60.
D) $2.80.
Conversion Cost
The blend of work and indirect expenses used to transform raw materials into completed goods.
Work in Process
Refers to the cost of unfinished goods in the manufacturing process including labor, raw materials, and overhead costs.
Total Conversion Costs
Total conversion costs are the sum of labor and overhead expenses incurred to convert raw materials into finished goods.
- Calculate the per unit conversion expenses for operations lacking an initial inventory of work-in-process.
Verified Answer
Total equivalent units of production = Units started into production + Ending work in process * Percentage complete
Total equivalent units of production = 28000 + 4000 * 0.25
Total equivalent units of production = 29000
Next, we can use the formula for calculating the cost per equivalent unit:
Cost per equivalent unit = Total conversion costs / Total equivalent units of production
Cost per equivalent unit = $140000 / 29000
Cost per equivalent unit = $4.83
Therefore, the conversion cost per unit is $4.83. However, the question asks for the conversion cost per unit of ending work in process inventory. Since ending work in process is 25% complete, we need to adjust the cost per equivalent unit calculation:
Cost per equivalent unit for ending work in process = Cost per equivalent unit * Percentage complete
Cost per equivalent unit for ending work in process = $4.83 * 0.25
Cost per equivalent unit for ending work in process = $1.21
Finally, we can calculate the conversion cost per unit of ending work in process inventory:
Conversion cost per unit for ending work in process = Cost per equivalent unit for ending work in process * Equivalent units of ending work in process
Conversion cost per unit for ending work in process = $1.21 * 4000
Conversion cost per unit for ending work in process = $4840/4000
Conversion cost per unit for ending work in process = $1.21
Therefore, the conversion cost per unit of ending work in process inventory is $1.21, which is closest to answer choice C ($5.60 is the cost per equivalent unit, not for ending work in process inventory).
Learning Objectives
- Calculate the per unit conversion expenses for operations lacking an initial inventory of work-in-process.
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