Question

For the month of September, Florida, Inc., incurs a direct materials cost of $12,000 for 7,500 gallons of strawberry lemonade produced in its Mixing Department. It also incurs conversion costs of $6,000 with 80% completed. If the conversion cost per equivalent unit was $1.15 per gallon in August, what is the difference in the conversion cost per equivalent unit between the two months

Answer 1

To calculate the difference in conversion cost per equivalent unit between September and August, we compute September's conversion cost per equivalent unit, which is $1.00, and subtract the given August cost of $1.15, resulting in a $0.15 difference per gallon.

Step-by-step explanation:

The student's question relates to calculating the conversion cost per equivalent unit for a beverage company's production during the months of September and August. To find the difference in the conversion cost per equivalent unit between the two months, we need to calculate the cost per equivalent unit for September and compare it to the given cost for August.

The conversion costs for September amount to $6,000 with 80% completion. To find the conversion cost per equivalent unit for September:

• First, calculate the equivalent units by multiplying the actual units (7,500 gallons) by the percentage of completion (80%), which results in 6,000 equivalent units (7,500 gallons * 0.80).
• Then, divide the total conversion costs by the equivalent units ($6,000 / 6,000 equivalent units) to get a cost of $1.00 per equivalent unit for September.

Given that the cost in August was $1.15 per gallon, the difference is $1.15 - $1.00 = $0.15 per gallon.

Answer 2

Florida, Inc.

The difference in the conversion cost per equivalent unit between the two months is:

= $0.15.

Step-by-step explanation:

a) Data and Calculations:

Direct materials cost = $12,000

Production units (gallons of strawberry lemonade) = 7,500

Conversion costs = $6,000

Degree of completion of conversion = 80%

Equivalent units of conversion = 6,000 (7,500 * 80%)

Therefore, the conversion cost per equivalent unit = $1.00 ($6,000/6,000)

The difference in the conversion cost per equivalent unit between the two months is $0.15 ($1.15 - $1.00)