Question

Tori Company uses the FIFO method in its process costing system. The first processing department, the Soldering Department, started the month with 29,000 units in its beginning work-in-process inventory that were 80% complete with respect to conversion costs. The conversion cost in this beginning work-in-process inventory was $113,150. An additional 81,200 units were started into production during the month. There were 35,000 units in the ending work-in-process inventory of the Soldering Department that were 90% complete with respect to conversion costs. A total of $577,125 in conversion costs were incurred in the department during the month. What would be the cost per equivalent unit for conversion costs?

a. 7.261

b. 7.107

c. 6.912

d. 6.422

Answer 1

	Equivalent unit of production			Unit	Completed during the period	Equivalent unit
a	Beginning WIP			29,000	20%	5800
	=22000*20%
b	Unit completed during the month			46200	100%	46200
	=81200-35000
c	Ending WIP			35000	90%	31500
	=35000*90%
d=a+b+c	Total equivalent unit prodcued					83500
	Computation of unit cost
i	Total conversion cost during the year					577,125
ii	Total equivalent unit prodcued					83500
iii=i/ii	Cost per equivalent unit					6.912
	Hence, correct answer is option c. = $6.912