Fanciful Structures Company uses the weighted-average method in its process costing system. The first processing department, the Welding Department, started the month with 22,800 units in its beginning work-in-process inventory that were 20% complete with respect to conversion costs. The conversion cost in this beginning work-in-process inventory was $24,320. An additional 97,800 units were started into production during the month and 101,000 units were completed in the Welding Department and transferred to the next processing department. There were 19,600 units in the ending work-in-process inventory of the Welding Department that were 40% complete with respect to conversion costs. A total of $530,380 in conversion costs were incurred in the department during the month. What would be the cost per equivalent unit for conversion costs for the month

$5.10

Explanation:

It is important to notice that the company uses the weighted-average method in its process costing system.

First, calculate the equivalent units of production with respect to conversion costs :

Conversion costs  : Equivalent Units

Ending Work In Process Inventory (19,600 × 40%)          7,840

Completed and Transferred Out (101,000 × 100%)       101,000

Equivalent units with respect to conversion costs       108,840

Next, calculate the total costs with respect to  conversion costs :

Conversion Costs  : Total Cost

Beginning Work In Process             $24,320

Costs Incurred during the period  $530,380

Total Conversion costs                  $554,700

Next, calculate the cost per equivalent unit of conversion costs :

Conversion Cost : Cost per unit

Cost per equivalent = Total Costs / Total Equivalent Units

Therefore,

Cost per equivalent = $554,700 / 108,840

                                 = $5.10

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