Question

What are equivalent units of production (EUP) for conversion costs? Hint: There are several questions about the process cost summary. Prepare the process cost summary in its entirety before attempting to answer the questions. Beginning work in process inventory (50 units): Units are 100% complete for materials and 60% complete for conversion Direct materials Conversion costs Total cost in beginning inventory $ 50 150 $ 200 Costs added this period: Direct materials (for 250 units started) Conversion costs Total costs added this period $850 1,920 $2,770

Answer 1

Equivalent units of production for conversion cost is 180

Step-by-step explanation:

An equivalent unit of production is an expression of the amount of work done by a manufacturer on units of output that are partially completed at the end of an accounting period. Equivalent units of production are the units in production multiplied by the percentage of those units that are complete (100 percent) or those that are in process.

Beginning work in progress (units) = 50

Units added this period = 250

Here we assume that all units are completed and transferred as there is no information on ending work in progress.

Direct material cost in the beginning inventory = $50

Direct material cost added this period = $850

Total direct material cost = 50 + 850 = $900

Conversion cost is given by direct labour plus overhead.

Conversion cost in the beginning inventory = $150 + $1920 = $2070

Conversion cost added this period = $200 + $2770

Total conversion cost = $5040

Equivalent units for direct materials = 300 (100% of 300)

Equivalent units for conversion cost = 60% of 300 = 180

Cost per equivalent unit :

Direct materials = 900/300 = $3

Conversion cost = 5040/180 = $28