At the end of October, Cranston Bottling's mixing department had "Total costs to account for" of $ 739 comma 731. Of this amount, $ 271 comma 596 related to direct materials costs, while the remainder related to conversion costs. The department had 52 comma 230 total equivalent units of direct materials and 45 comma 450 total equivalent units of conversion costs for the month.

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Compute the cost per equivalent unit (processing costing step 4)

At the end of October, Cranston Bottling’s mixing department had “Total cost to account for” of $739,731. Of this amount, $271,596 related to direct material costs, while the remainder related to conversion costs. The department had 52,230 total equivalent units of direct materials and 45,450 total equivalent units of conversion costs for the month.

Compute the cost per equivalent unit for direct materials and the cost per equivalent unit for conversion costs.  

Answers:

a. cost per equivalent unit for direct material = $5.2

b cost per equivalent unit for conversion costs = $10.3

Explanation:

To calculate the cost per unit of a material, we have to determine the total costs, the total units produced, then divide the total costs by the total units.

In this example, there are two costs of interest; cost for direct materials and cost for conversion.

Total cost = cost of direct material + conversion cost = $739,731

cost for direct material = $271,596

∴ conversion cost = Total cost - cost of direct material

= 739,731 - 271,596 = $468,135

Next, we are told the units for each of the costs;

total unit of Direct materials cost= 52,230

total unit of conversion cost = 45,450

Finally to get the cost per equivalent unit, we will divide the total costs each by their respective total units;

cost per equivalent unit for direct material = cost for direct material ÷ total units of direct material cost

= 271,596 ÷ 52230 = $5.2

cost per equivalent for conversion cost = total conversion cost ÷ total units of conversion cost

= 468,135 ÷ 45,450 = $10.3

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