Question

Carmelita Inc., has the following information available:

	Costs from Beginning Inventory	Costs from current Period
Direct materials	$5,800	$25,300
Conversion costs	6,300	158,600

At the beginning of the period, there were 400 units in process that were 40% complete as to conversion costs and 100% complete as to direct materials costs. During the period, 5,500 units were started and completed. Ending inventory contained 400 units that were 32% complete as to conversion costs and 100% complete as to materials costs. The company uses the FIFO process cost method.

The cost of completing a unit during the current period was

a.$37.58

b.$31.32

c.$27.03

d.$46.97

Answer 1

The correct option is (b) i.e. $31.32 which is calculated as below:-
Cost of completing a unit during the current period =
(Cost of direct material / Equivalent unit of materials) +
(Cost of conversion / Equivalent unit of conversion)
(25,300/5,900) + (158,600/5,868) = 4.29 + 27.03 = 31.32
Equivalent unit of materials = (400*0%)+(5,500*100%)+(400*100%) = 5,900
Equivalent unit of conversion = (400*60%)+(5,500*100%)+(400*32%) = 5,868