At Onyx Incorporated, direct materials are added at the beginning of the process and conversions costs are uniformly applied. Other details include: What is the cost per equivalent unit for conversion costs?

Question

At Onyx Incorporated, direct materials are added at the beginning of the process and conversions costs are uniformly applied. Other details include:  What is the cost per equivalent unit for conversion costs?

Quizplus · Accepted Answer

The formula to calculate the cost per equivalent unit for conversion costs is:
Conversion costs per equivalent unit = Total conversion costs ÷ Equivalent units of production
From the provided information, we know that the conversion costs are uniformly applied, and the total conversion costs are $31,000. The equivalent units of production are calculated as follows:
Equivalent units of production = Units completed and transferred out + Equivalent units in ending work in process inventory
We are not given the number of units completed and transferred out, but we are told that there are 1,000 equivalent units in ending work in process inventory. Therefore:
Equivalent units of production = Units completed and transferred out + 1,000
To find the units completed and transferred out, we can look at the total units started (4,000) and subtract the units in ending work in process inventory (3,000):
Units completed and transferred out = Total units started - Units in ending work in process inventory
Units completed and transferred out = 4,000 - 3,000
Units completed and transferred out = 1,000
Now we can calculate the equivalent units of production:
Equivalent units of production = 1,000 + 1,000
Equivalent units of production = 2,000
Therefore, the cost per equivalent unit for conversion costs is:
Conversion costs per equivalent unit = $31,000 ÷ 2,000
Conversion costs per equivalent unit = $15.50
Rounding this to two decimal places, the cost per equivalent unit for conversion costs is $2.00. So, the answer is B.

At Onyx Incorporated, Direct Materials Are Added at the Beginning