Question

Swifty Company decided to analyze certain costs for June of the current year. Units started into production equaled 14200

and ending work in process equaled 1500 units. With no beginning work in process inventory, how much is the conversion
cost per unit if ending work in process was 20% complete, total conversion costs equaled $40300, and conversion costs
Bwere applied uniformly throughout production?
a) $3.17.
b) $3.10.
c) $1.55.
d) $2.57.

Answer 1

The conversion cost per unit for Swifty Company is calculated by adding the units completed to the percentage completion of the ending work-in-process inventory. After computing the equivalent units for conversion costs, the total conversion costs are divided by these units to get the cost per unit, which is $3.10.

Step-by-step explanation:

The question pertains to the calculation of conversion cost per unit in a production setting. Swifty Company started with 14,200 units and ended with a work-in-process (WIP) inventory of 1,500 units, which were 20% complete.

With no beginning WIP inventory and total conversion costs of $40,300 that were applied uniformly, we calculate the equivalent units for conversion costs by considering both the units completed and the percentage completion of the ending WIP.

To calculate the equivalent units, we add the units completed (14,200 units started - 1,500 units in ending WIP) to the product of the percentage completion of the ending WIP (20% of 1,500 units). Then we divide the total conversion costs by the equivalent units for conversion costs to find the conversion cost per unit.

Equivalent units for conversion costs = (14,200 - 1,500) + (20% of 1,500) = 12,700 + 300 = 13,000 units.

Conversion cost per unit = Total conversion costs / Equivalent units for conversion costs = $40,300 / 13,000 units = $3.10 per unit.

Hence, the correct answer is (b) $3.10.