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9 April, 19:32

Lanjan Corporation uses the weighted-average method in its process costing system. Operating data for the first processing department for the month of June appear below: Units Percent Complete with Respect to Conversion Beginning work in process inventory 14,000 50 % Started into production during June 76,000 Ending work in process inventory 20,000 10 % According to the company's records, the conversion cost in beginning work in process inventory was $92,218 at the beginning of June. Additional conversion costs of $571,618 were incurred in the department during the month. What was the cost per equivalent unit for conversion costs for the month

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  1. 9 April, 21:39
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    Cost per Equivalent Unit = $663, 836/72,000 units = $9,220

    Explanation:

    We are asked to determine the cost per equivalent unit for conversion costs for the month of June

    Step 1: we determine the quantity of units that were transferred to the next department

    Quantity transferred = Opening Work in Progress + Units Started and in production - The Closing inventory of Work in Progress

    = 14,000 units + 76,000 units - 20,000 units = 70, 000 units

    Step 2: Calculate the number of Equivalent units in production

    Equivalent Units in Production = Units transferred + The Closing Inventory of work in Progress

    = 70,000 units + (20,000 units x 10%)

    = 70,000 units + 2,000 units

    =72,000 units

    Step 3: We calculate the Cost per Equivalent Unit

    = The Total Cost of Production / The Equivalent Units (determined in step 2)

    Total Cost = Cost in beginning WIP Inventory + Additional Conversion cost

    = $92,218 + $571,618 = $663,836

    Cost per Equivalent Unit = $663, 836/72,000 units = $9,220
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