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21 March, 12:09

Sparky Corporation uses the weighted-average method of process costing. The following information is available for February in its Molding Department: Units: Beginning Inventory: 28,000 units, 100% complete as to materials and 60% complete as to conversion. Units started and completed: 116,000. Units completed and transferred out: 144,000. Ending Inventory: 31,500 units, 100% complete as to materials and 25% complete as to conversion. Costs: Costs in beginning Work in Process - Direct Materials: $46,000. Costs in beginning Work in Process - Conversion: $51,850. Costs incurred in February - Direct Materials: $316,730. Costs incurred in February - Conversion: $602,150. Calculate the cost per equivalent unit of conversion.

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  1. 21 March, 15:16
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    Cost per equivalent unit = 4.015 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 conversion cost per equivalent unit, we follow the steps below

    Step 1

    Determine the total equivalent units

    Items units Equivalent units

    Completed units 144,000 144,000 * 100% 144,000

    Closing inventory 31,500 31,500 * 60% = 18900

    Total equivalent unit 162,900

    Step 2

    Calculate cost per equivalent unit

    Cost per equivalent unit = Total conversion cost/Total equivalent units

    = (602,150 + 51,850) / 162,900 units

    = 4.015 per units
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