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27 July, 04:27

Sparky Corporation uses the weighted-average method of process costing. The following information is available for February in its Molding Department: Units: Beginning Inventory: 29,000 units, 100% complete as to materials and 60% complete as to conversion. Units started and completed: 118,000. Units completed and transferred out: 147,000. Ending Inventory: 32,000 units, 100% complete as to materials and 25% complete as to conversion. Costs: Costs in beginning Work in Process - Direct Materials: $47,000. Costs in beginning Work in Process - Conversion: $52,850. Costs incurred in February - Direct Materials: $320,650. Costs incurred in February - Conversion: $603,150. Calculate the cost per equivalent unit of conversion.

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  1. 27 July, 04:42
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    Cost per equivalent unit = $4.23 per unit

    Explanation:

    Under the weighted average method of valuation, to account for completed units, it is assumed that the entire degree of work required is done in the period under consideration. So there is no separation of the completed units into opening inventory and fully worked.

    Cost per equivalent unit = cost / total equivalent units

    To determine the cost per equivalent unit of conversion cost, we follow the steps below

    Step 1

    Determine the total equivalent units

    Item Equivalent units

    Transferred out 100% * 147,000 = 147,000

    closing inventory 25% * 32,000 = 8000

    Total Equivalent unit 155,000

    Step 2: cost per equivalent units

    Cost per equivalent units = Total conversion cost/Equivalent units

    = ($52,850 + $603,150) / 155,000 units = $4.23 per unit

    Cost per equivalent unit = $4.23 per unit

    =
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