The Martin Rubber Company produces tires. The following information is available for Martin:
Beginning work in process inventory: 2,000 tires, 100% complete for direct materials, 60% complete for conversion costs, cost of direct materials = $12,000, cost of direct labor and manufacturing overhead allocated = $10,000 Current period activity: 12,600 tires completed, cost of direct materials added = $300,950, cost of direct labor and manufacturing overhead allocated = $232,980 Ending work in process inventory: 4,500 units, 100% complete for direct materials, 40% complete for conversion costs What was the conversion cost per equivalent unit of production?

Question

Quizplus · Accepted Answer

To calculate the conversion cost per equivalent unit of production, we first need to determine the total conversion costs and the equivalent units for conversion costs. The total conversion costs include the beginning work in process conversion costs and the conversion costs added during the period. The beginning work in process conversion costs are $10,000 (since the beginning inventory is 60% complete for conversion costs). The conversion costs added during the period are $232,980. Therefore, the total conversion costs are $10,000 + $232,980 = $242,980.Next, we calculate the equivalent units for conversion costs. The completed units (12,600) are 100% complete for conversion costs. The ending work in process inventory (4,500 units) is 40% complete for conversion costs, so the equivalent units for the ending inventory are 4,500 units * 40% = 1,800 equivalent units. Therefore, the total equivalent units for conversion costs are 12,600 (completed units) + 1,800 (equivalent units from ending inventory) = 14,400 equivalent units.Finally, we calculate the conversion cost per equivalent unit by dividing the total conversion costs by the total equivalent units for conversion costs: $242,980 / 14,400 equivalent units = $16.87.

The Martin Rubber Company Produces Tires