Question

Eban Corporation uses the FIFO method in its process costing system. The first processing department, the Welding Department, started the month with 19,200 units in its beginning work in process inventory that were 50% complete with respect to conversion costs. The conversion cost in this beginning work in process inventory was $56,200. An additional 59,000 units were started into production during the month. There were 16,800 units in the ending work in process inventory of the Welding Department that were 20% complete with respect to conversion costs. A total of $292,160 in conversion costs were incurred in the department during the month.

The cost per equivalent unit for conversion costs is closest to:

Answer 1

The correct answer is

$ 5.3

Calculation

Firstly we have to calculate the equivalent units

= (units in beginning inventory * percentage completion during the period) + (units started and completed ) + (units in ending inventory * % completed)

= (19200*50%) + (59000-16800)+(16800*20%)

= 9600 + 42200 + 3360

= 55160

Cost per equivalent unit for conversion cost

= cost incurred during the period / equivalent units

= 292160 / 55160

= $ 5.3 Per equivalent units

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