Byrd Company decided to analyze certain costs for June of the current year. Units started into production equaled 14000 and ending work in process equaled 2000 units. 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 $52500?

Question

Quizplus · Accepted Answer

Conversion cost per unit can be calculated using the following formula:
Conversion Cost per Unit = Total Conversion Cost / Units completed

Units completed = Units started into production – Ending work in process inventory
Units completed = 14000 – (2000 * 25%) = 14000 – 500 = 13500

Therefore, Conversion Cost per Unit = $52500 / 13500 = $3.89

However, since the ending work in process inventory is 25% complete, we need to add the cost of the remaining 75% of conversion costs in the ending work in process inventory. This can be calculated as:
Cost of ending work in process = (75% * $52500) / 14000 = $2.81 per unit

So, total Conversion Cost per Unit = $3.89 + $2.81 = $6.70
But the question only asks for the conversion cost of the completed units, so we need to subtract the cost of the ending work in process from the total Conversion cost per Unit.

Therefore, Conversion Cost per Unit = $6.70 - $2.10 = $4.60

Therefore, the best choice is C, $4.20 (closest option).

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