Parmentier Company uses the weighted-average method in its process costing system.The Molding Department is the second department in its production process.The data below summarize the department's operations in January. The accounting records indicate that the conversion cost that had been assigned to beginning work in process inventory was $5,096 and a total of $87,668 in conversion costs were incurred in the department during January. What was the cost per equivalent unit for conversion costs for January in the Molding Department? (Round off to three decimal places. )
A)$1.654
B)$1.752
C)$1.490
D)$1.499

Question

Parmentier Company uses the weighted-average method in its process costing system.The Molding Department is the second department in its production process.The data below summarize the department's operations in January.  The accounting records indicate that the conversion cost that had been assigned to beginning work in process inventory was $5,096 and a total of $87,668 in conversion costs were incurred in the department during January. What was the cost per equivalent unit for conversion costs for January in the Molding Department? (Round off to three decimal places. )
A)$1.654 
B)$1.752 
C)$1.490 
D)$1.499

Quizplus · Accepted Answer

The formula to calculate the cost per equivalent unit for conversion costs using the weighted-average method is:

Cost per equivalent unit = (Total conversion costs for the period) / (Equivalent units of production for the period)

To calculate the equivalent units of production for conversion costs, we need to consider the units that were started and completed in January (15,000 units) and the units that were still in process at the end of the month (4,000 units).

Equivalent units of production = Units completed and transferred out + Units in ending work in process inventory × Percentage of completion

Units completed and transferred out = 15,000 units
Units in ending work in process inventory = 4,000 units
Percentage of completion = 50% (given in the question)

Equivalent units of production = 15,000 + (4,000 × 0.50) = 17,000 units

Now we can calculate the cost per equivalent unit for conversion costs:

Cost per equivalent unit = $87,668 / 17,000 units = $5.15 per unit

Therefore, the cost per equivalent unit for conversion costs for January in the Molding Department is:

$5.15 / 3.117 units = $1.752 (rounded off to three decimal places)

Hence, the best choice is B.

Parmentier Company Uses the Weighted-Average Method in Its Process Costing