Question

A production department’s beginning inventory cost includes \(394,900 of conversion costs. This department incurs an additional \)907,500 in conversion costs in the month of March. Equivalent units of production for conversion total 740,000 for March. Calculate the cost per equivalent unit of conversion using the weighted-average method.

Short answer

The cost per equivalent unit is:$1.76

Step-by-step solution

Definition of Finished Goods

Finished goods can be defined as all those goods held by the business entity that has passed all the processes of the product and is now ready for sale. These goods are reported as a resource of the business.

Calculation of total cost incurred

Particular	Amount $
Beginning inventory conversion cost	$394,900
Add: Conversion cost incurred	907,500
Total cost incurred	$1,302,400

Calculation of cost per equivalent units for conversion

$$\begin{gathered} \mathit{c}\mathit{o}\mathit{s}\mathit{t}\mathbf{}\mathit{p}\mathit{e}\mathit{r}\mathbf{}\mathit{e}\mathit{q}\mathit{u}\mathit{i}\mathit{v}\mathit{a}\mathit{l}\mathit{e}\mathit{n}\mathit{t}\mathbf{}\mathit{u}\mathit{n}\mathit{i}\mathit{t}\mathit{s}\mathbf{}\mathit{f}\mathit{o}\mathit{r}\mathbf{}\mathit{c}\mathit{o}\mathit{n}\mathit{v}\mathit{e}\mathit{r}\mathit{s}\mathit{i}\mathit{o}\mathit{n}\mathbf{=}\frac{\mathbf{T}\mathbf{o}\mathbf{t}\mathbf{a}\mathbf{l}\mathbf{}\mathbf{c}\mathbf{o}\mathbf{s}\mathbf{t}\mathbf{}\mathbf{i}\mathbf{n}\mathbf{c}\mathbf{u}\mathbf{r}\mathbf{r}\mathbf{e}\mathbf{d}}{\mathbf{E}\mathbf{q}\mathbf{u}\mathbf{i}\mathbf{v}\mathbf{a}\mathbf{l}\mathbf{e}\mathbf{n}\mathbf{t}\mathbf{}\mathbf{u}\mathbf{n}\mathbf{i}\mathbf{t}\mathbf{s}} \\ \mathbf{=}\frac{\mathbf{\$}\mathbf{1}\mathbf{,}\mathbf{302}\mathbf{,}\mathbf{400}}{\mathbf{740}\mathbf{,}\mathbf{000}} \\ \mathbf{=}\mathbf{\$}\mathbf{1}\mathbf{.}\mathbf{76} \end{gathered}$$