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
