Sparky Corporation uses the weighted-average method of process costing. The following information is available for February in its Molding Department: Units: Beginning Inventory: 29,000 units, 100% complete as to materials and 60% complete as to conversion. Units started and completed: 118,000. Units completed and transferred out: 147,000. Ending Inventory: 32,000 units, 100% complete as to materials and 25% complete as to conversion. Costs: Costs in beginning Work in Process - Direct Materials: $47,000. Costs in beginning Work in Process - Conversion: $52,850. Costs incurred in February - Direct Materials: $320,650. Costs incurred in February - Conversion: $603,150. Calculate the cost per equivalent unit of conversion.

Cost per equivalent unit = $4.23 per unit

Explanation:

Under the weighted average method of valuation, to account for completed units, it is assumed that the entire degree of work required is done in the period under consideration. So there is no separation of the completed units into opening inventory and fully worked.

Cost per equivalent unit = cost / total equivalent units

To determine the cost per equivalent unit of conversion cost , we follow the steps below

Step 1

Determine the total equivalent units

Item                                                                          Equivalent units

Transferred out                   100%×  147,000 =              147,000

closing inventory               25% ×   32,000 =                     8000

Total Equivalent unit                                                      155,000

Step 2: cost per equivalent units                              

Cost per equivalent units= Total conversion  cost/Equivalent units

= ( $52,850+ $603,150)/155,000 units= $4.23 per unit

Cost per equivalent unit = $4.23 per unit

=

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