A department adds all raw materials at the beginning of the process and incurs conversion costs uniformly throughout the process. For the month of July, there was no beginning work-in-process inventory; 18,000 units were completed and transferred out; and there were 10,000 units in the ending work-in-process inventory that were 40% complete. During July, $308,000 materials costs and $286,000 conversion costs were charged to the department. The product cost per unit of production for materials and conversion costs for the month of July was:
Material Conversion

Question

Quizplus · Accepted Answer

The total units to account for are 28,000 (18,000 completed + 10,000 in ending WIP). Materials cost per unit is $308,000 / 28,000 = $11. Conversion costs are spread over equivalent units, which are 22,000 (18,000 completed + 4,000 equivalent units for 40% of 10,000 in WIP), so conversion cost per unit is $286,000 / 22,000 = $13.

A Department Adds All Raw Materials at the Beginning of the Process