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25 January, 09:08

Thomas Company uses the weighted-average method in its process costing system. The first processing department, the Welding Department, started the month with 10,000 units in its beginning work in process inventory that were 30% complete with respect to conversion costs. The conversion cost in this beginning work in process inventory was $19,200. An additional 60,000 units were started into production during the month. There were 19,000 units in the ending work in process inventory of the Welding Department that were 70% complete with respect to conversion costs. A total of $380,060 in conversion costs were incurred in the department during the month. What would be the cost per equivalent unit for conversion costs for the month?

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  1. 25 January, 09:23
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    Cost per equivalent unit for conversion costs for the month = $6.21

    Explanation:

    The weighted average cost of valuation does not separate the opening inventory from the units newly introduced when accounting for completed units in a production period.

    To determine the cost per equivalent units using Weighted Average Method, follow the steps below:

    Step 1: Determine the equivalent Unit

    Completed units = 10,000 + 60,000-19000 = 51000

    Items Workings Equiva. Units

    Completed units 51,000 (51000 * 100%) = 51,000

    Closing WIP 19,000 19,000 * 70%) = 2,800

    Total Equivalent units 64,300

    Step 2 : calculate total conversion cost

    = 19,200 + $380,060 = 399,260

    Step 3 = Cost per Equivalent unit per conversion cost

    Cost per unit = Total conversion cost/total Equivalent units

    =399,260 / 64,300

    = $6.21

    Cost per equivalent unit for conversion costs for the month = $6.21
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