Department A had no beginning inventory. The department added direct materials o

Question

Department A had no beginning inventory. The department added direct materials of $120,000 and conversion costs of $176,000 during the month of June. Materials are added at the beginning of the process and conversion costs are added evenly throughout the process in this department. During the period 40,000 units were completed and at the end of the period 40,000 units remained which were 10% complete. What is the cost per equivalent unit of materials and conversion costs, respectively in June?

Department A had no beginning inventory. The department added direct materials of $120,000 and conversion costs of $176,000 during the month of June. Materials are added at the beginning of the process and conversion costs are added evenly throughout the process in this department. During the period 40,000 units were completed and at the end of the period 40,000 units remained which were 10% complete. What is the cost per equivalent unit of materials and conversion costs, respectively in June?

Explanation / Answer

Total units in consideration for materials = 40000 + 40000 = 80,000

Hence cost of materials per unit = 120,000 / 80,000 = $1.5

Total units in consideration for conversion costs = 40000 + 10% of 40000 = 44,000

Conversion cost per unit = 176,000 / 44,000 = $4

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