Question

Universal Manufacturing uses a weighted-average process-costing system. All materials are introduced at the start of manufacturing, and conversion costs are incurred evenly throughout the process. The company's beginning and ending work-in-process inventories totaled 10,000 units and 15,000 units, respectively, with the latter units being 2/3 complete at the end of the period. Universal started 30,000 units into production and completed 25,000 units. Manufacturing costs follow.
Beginning work in process: Materials, $60,000; conversion cost, $150,000
Current costs: Materials, $180,000; conversion cost, $480,000
Universal's equivalent-unit cost for conversion cost is:____.
a. $4.50.
b. $6.00.
c. $8.00.
d. $9.60.
e. some other amount.

Answer 1

Answer: b. $6.00

Explanation:

Equivalent Cost Per Unit = Total Material Cost/Materials Equivalent Units

Materials Equivalent Units

= Opening inventory + Units completed + Ending inventory

= 10,000 + 25,000 + 5,000

= 40,000 units

Equivalent cost per unit = (Beginning WIP Materials + Current costs) / Materials EUP

= (60,000 + 180,000) / 40,000

= $6.00

Note: Ending materials inventory = Units started - Units completed