Maisley Company decided to analyze certain costs for June of the current year. Units started into production equaled 28000 and ending work in process equaled 4000. With no beginning work in process inventory how much is the conversion cost per unit if ending work in process was 25% complete and total conversion costs equaled $140000?

Question

Quizplus · Accepted Answer

First, we need to find the total equivalent units of production. Since there was no beginning inventory for conversion costs, all units started into production are considered in process during the current period. Therefore,

Total equivalent units of production = Units started into production + Ending work in process * Percentage complete
Total equivalent units of production = 28000 + 4000 * 0.25 
Total equivalent units of production = 29000

Next, we can use the formula for calculating the cost per equivalent unit:

Cost per equivalent unit = Total conversion costs / Total equivalent units of production
Cost per equivalent unit = $140000 / 29000
Cost per equivalent unit = $4.83

Therefore, the conversion cost per unit is $4.83. However, the question asks for the conversion cost per unit of ending work in process inventory. Since ending work in process is 25% complete, we need to adjust the cost per equivalent unit calculation:

Cost per equivalent unit for ending work in process = Cost per equivalent unit * Percentage complete
Cost per equivalent unit for ending work in process = $4.83 * 0.25
Cost per equivalent unit for ending work in process = $1.21

Finally, we can calculate the conversion cost per unit of ending work in process inventory:

Conversion cost per unit for ending work in process = Cost per equivalent unit for ending work in process * Equivalent units of ending work in process
Conversion cost per unit for ending work in process = $1.21 * 4000
Conversion cost per unit for ending work in process = $4840/4000
Conversion cost per unit for ending work in process = $1.21

Therefore, the conversion cost per unit of ending work in process inventory is $1.21, which is closest to answer choice C ($5.60 is the cost per equivalent unit, not for ending work in process inventory).

Maisley Company Decided to Analyze Certain Costs for June of the Current