For the month of July, Jacobs Company incurs a direct materials cost of $6,000 for 6,000 gallons of paint produced in its Mixing Department. It also incurs conversion costs of $1,470 with 70% completed. If the conversion cost per equivalent unit was $0.25 per gallon in June, what is the difference in the conversion cost per equivalent unit between th

The difference in the conversion cost per equivalent unit between the month of June and July is $0.10 .

Explanation:

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For the month of July, Jacobs Company incurs a direct materials cost of $6,000 for 6,000 gallons of paint produced in its Mixing Department. It also incurs conversion costs of $1,470 with 70% completed. If the conversion cost per equivalent unit was $0.25 per gallon in June, what is the difference in the conversion cost per equivalent unit between the month of June and July.

Solution :

First Calculate the Total Equivalent Units of Production for Conversion Cost for July

Total Equivalent Units = 6,000 × 70%

                                     = 4,200

Then Calculate the Cost per Equivalent Unit for July

Cost per Equivalent Unit = Total Cost / Total Equivalent Units

                                         = $1,470 / 4,200

                                         = $0.35

Difference = $0.35 - $0.25

               = $0.10

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