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STEP 3: Determine the cost per equivalent unit. In order to determine the total cost to produce a unit, a manufacturer must compute the materials
STEP 3: Determine the cost per equivalent unit. In order to determine the total cost to produce a unit, a manufacturer must compute the materials cost and the conversion cost (labor and overhead) in a completed unit. This amount is the cost per equivalent unit. The formula for this calculation is: Cost per Equivalent Unit = Costs Incurred During the Month Equivalent Units Produced During the Month The cost per equivalent unit must be calculated separately for materials and conversion costs since these resources are added at different rates in the manufacturing process (materials are added all at the beginning and conversion costs evenly throughout the process). The Transfer In cost per equivalent unit must also be calculated. Materials Equivalent Unit Cost is calculated as follows: $ EUP from above (step 2) Conversion Equivalent Unit Cost is calculated as follows: $ $ EUP for above (step 2) Transfer In Equivalent Unit Cost is calculated as follows: S S EUP (EUP for Transfer In is 100% of number transferred in)
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