Question

Lanjan Corporation uses the weighted-average method in its process costing system. Operating data for the first processing department for the month of June appear below: Units Percent Complete with Respect to Conversion Beginning work in process inventory 14,000 50 % Started into production during June 76,000 Ending work in process inventory 20,000 10 % According to the company's records, the conversion cost in beginning work in process inventory was $92,218 at the beginning of June. Additional conversion costs of $571,618 were incurred in the department during the month. What was the cost per equivalent unit for conversion costs for the month

Answer 1

Answer:

Cost per Equivalent Unit = $663, 836/72,000 units = $9,220

Explanation:

We are asked to determine the cost per equivalent unit for conversion costs for the month of June

Step 1: we determine the quantity of units that were transferred to the next department

Quantity transferred = Opening Work in Progress + Units Started and in production - The Closing inventory of Work in Progress

= 14,000 units +76,000 units -20,000 units = 70, 000 units

Step 2: Calculate the number of Equivalent units in production

Equivalent Units in Production= Units transferred + The Closing Inventory of work in Progress

= 70,000 units + (20,000 units x 10%)

= 70,000 units + 2,000 units

=72,000 units

Step 3: We calculate the Cost per Equivalent Unit

= The Total Cost of Production / The Equivalent Units (determined in step 2)

Total Cost =Cost in beginning WIP Inventory + Additional Conversion cost

= $92,218 + $571,618= $663,836

Cost per Equivalent Unit = $663, 836/72,000 units = $9,220