Van Pelt Company uses the average cost method of process costing.The production report for the Mixing department follows: What are the equivalent units for: Materials Conversion Costs
A)5,650 5,450
B)5,450 5,275
C)4,850 4,400
D)5,400 5,220

Question

Van Pelt Company uses the average cost method of process costing.The production report for the Mixing department follows:  What are the equivalent units for: Materials Conversion Costs
A)5,650 5,450 
B)5,450 5,275 
C)4,850 4,400 
D)5,400 5,220

Quizplus · Accepted Answer

To calculate equivalent units for materials, we add the units in the beginning inventory to the units started during the period and multiply the total by the percentage of work done to complete the units in the ending inventory. 
For the Mixing department, the equivalent units for materials are:
9,000 + 32,000 = 41,000 units started and in beginning inventory
20,000 units in ending inventory × 80% completion = 16,000 equivalent units for materials

To calculate equivalent units for conversion costs, we use the same method, but we multiply the total by the percentage of conversion costs incurred during the period. 
For the Mixing department, the equivalent units for conversion costs are:
9,000 + 32,000 = 41,000 units started and in beginning inventory
20,000 units in ending inventory × 80% completion = 16,000 equivalent units for conversion costs
16,000 equivalent units × 85% completion = 13,600 equivalent units for conversion costs

Therefore, the correct answer is B, with equivalent units for materials of 16,000 and equivalent units for conversion costs of 13,600.

Van Pelt Company Uses the Average Cost Method of Process