Mickler Productions uses process costing. Its Mixing Department incurred conversion costs of $650,820 during January, and had a beginning Work in Process inventory of $30,430 for conversion costs. 54,000 units were transferred out of the department, and the ending inventory consisted of 2,500 units that are 20% complete with respect to conversion costs. What is the conversion cost per equivalent unit?

Question

Quizplus · Accepted Answer

The conversion cost per equivalent unit is calculated by dividing the total conversion costs by the equivalent units of production. The equivalent units of production are calculated by adding the units transferred out to the units in ending inventory, and then multiplying the units in ending inventory by their percentage of completion. In this case, the equivalent units of production are 54,000 + (2,500 x 20%) = 54,500. The conversion cost per equivalent unit is therefore $650,820 / 54,500 = $12.05.

Mickler Productions Uses Process Costing