Maisley Company decided to analyze certain costs for June of the current year. Units started into production equaled 28,000 and ending work in process equaled 4,000. With no beginning work in process inventory, how much is the conversion cost per unit if ending work in process was 25% complete and total conversion costs equaled $140,000

The conversion cost per unit is $4.83

Explanation:

First step is to determine the Total Equivalent units of Production for Conversion costs.

Assuming that Maisley Company uses the FIFO method in its production, the following is the Total Equivalent Units of production for conversion costs :

To Finish Opening Work In Process                             0

Started and Completed                                           28,000

Closing Work In Process (4,000 × 25%)                    1,000

Total Equivalent Units of production                      29,000

Then find cost per equivalent unit of production for conversion costs.

Cost per equivalent unit = Total Current Period Cost / Total Equivalent Units of production  

                                        =  $140,000 / 29,000

                                        =  $4.827586

                                        =  $4.83

Conclusion :

The conversion cost per unit is $4.83

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