Acompany uses the weighted average method for inventory costing. at the start of a period the production department had 20,000 units in beginning work in process inventory which were 40% complete; the department completed and transferred 165,000 units. at the end of the period, 22,000 units were in the ending work in process inventory and are 75% complete. the production department had conversion costs in the beginning goods is process inventory of $99,000 and total conversion costs added during the period are $726,825. compute the conversion cost per equivalent unit.

Answer

The cost per unit is 4.55 dollars.

Calculation

First we need to calculate equivalent production in order to determine cost per unit.

Equivalent production = Unit transfered out+ Closing units * % completion

                                     = 165,000 + 22,000*75%

                                     = 181,500

Now we can calculate cost per equivalent unit by dividing sum of opening inventory cost and total cost added during period with equivalant production calculated above.

Cost per equivalent = (99,000 + 726,825)/ 181,500

                                = 4.55

* In weighted average method for inventory valuation is opening stock lost it identity for per unit cost calculation.

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