Asked by Nicole Mowatt on Jun 08, 2024
Verified
Byrd Company decided to analyze certain costs for June of the current year. Units started into production equaled 14000 and ending work in process equaled 2000 units. 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 $52500?
A) $3.28.
B) $4.38.
C) $4.20.
D) $2.10.
Conversion Cost
The sum of direct labor and manufacturing overhead costs, representing the expense to convert raw materials into finished products.
Ending Work
Ending work often refers to the inventory of unfinished goods at the end of an accounting period.
- Determine the overall and individual costs associated with production.
- Become familiar with the approach to determine total production costs and the expense per unit.
Verified Answer
UN
Ubaid Nasir PatelJun 12, 2024
Final Answer :
C
Explanation :
Conversion cost per unit can be calculated using the following formula:
Conversion Cost per Unit = Total Conversion Cost / Units completed
Units completed = Units started into production – Ending work in process inventory
Units completed = 14000 – (2000 * 25%) = 14000 – 500 = 13500
Therefore, Conversion Cost per Unit = $52500 / 13500 = $3.89
However, since the ending work in process inventory is 25% complete, we need to add the cost of the remaining 75% of conversion costs in the ending work in process inventory. This can be calculated as:
Cost of ending work in process = (75% * $52500) / 14000 = $2.81 per unit
So, total Conversion Cost per Unit = $3.89 + $2.81 = $6.70
But the question only asks for the conversion cost of the completed units, so we need to subtract the cost of the ending work in process from the total Conversion cost per Unit.
Therefore, Conversion Cost per Unit = $6.70 - $2.10 = $4.60
Therefore, the best choice is C, $4.20 (closest option).
Conversion Cost per Unit = Total Conversion Cost / Units completed
Units completed = Units started into production – Ending work in process inventory
Units completed = 14000 – (2000 * 25%) = 14000 – 500 = 13500
Therefore, Conversion Cost per Unit = $52500 / 13500 = $3.89
However, since the ending work in process inventory is 25% complete, we need to add the cost of the remaining 75% of conversion costs in the ending work in process inventory. This can be calculated as:
Cost of ending work in process = (75% * $52500) / 14000 = $2.81 per unit
So, total Conversion Cost per Unit = $3.89 + $2.81 = $6.70
But the question only asks for the conversion cost of the completed units, so we need to subtract the cost of the ending work in process from the total Conversion cost per Unit.
Therefore, Conversion Cost per Unit = $6.70 - $2.10 = $4.60
Therefore, the best choice is C, $4.20 (closest option).
Learning Objectives
- Determine the overall and individual costs associated with production.
- Become familiar with the approach to determine total production costs and the expense per unit.
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