Question

During July, the equivalent full units of conversion costs added to the product worked on by Department B amounted to a total of 85,000 applied as follows: beginning inventory, 20,000 units; units started and completed in July, 60,000 units: and ending inventory, 5,000 units. Assuming that the cost of conversion costs applied to the department in July was $212,500: the amount of the conversion cost to be assigned to the ending inventory would be

Answer 1

$12,500

Step-by-step explanation:

Given that,

During July,

Equivalent units of conversion costs added to the product = 85,000

Beginning inventory = 20,000 units

Units started and completed in July = 60,000 units

Ending inventory = 5,000 units

Cost of conversion costs applied to the department = $212,500

The amount of the conversion cost to be assigned to the ending inventory would be calculated by the product of Equivalent units of conversion costs and the per item cost.

Per item cost:

= Cost of conversion costs ÷ Equivalent units of conversion costs

= $212,500 ÷ 85,000

= $2.50

Amount of the conversion cost assigned to the ending inventory:

= Per item cost × Ending inventory

= $2.50 × 5,000 units

= $12,500