Heathcoat Co.uses process costing to account for the production of canned vegetables.Direct materials are added at the beginning of the process and conversion costs are incurred uniformly throughout the process.Beginning inventory consisted of $7,000 in materials and $4,000 in conversion costs.April costs were $36,000 for materials and $40,000 for conversion costs.On April 1,there were 2,000 units in beginning inventory (80% complete).During April 10,000 units were completed.Ending in process inventory was 4,000 units (100% complete for materials,40% for conversion).The cost per equivalent unit for conversion costs using the FIFO method would be:
A)$4.00
B)$4.40
C)$1.10
D)$8.70

Question

Quizplus · Accepted Answer

To calculate the cost per equivalent unit for conversion costs using the FIFO method, we first determine the equivalent units for conversion costs. The beginning inventory is 80% complete, so 20% of the 2,000 units need conversion. Additionally, 10,000 units were completed, and 4,000 units are 40% complete. The equivalent units for conversion are: (2,000 * 20%) + 10,000 + (4,000 * 40%) = 400 + 10,000 + 1,600 = 12,000. The total conversion costs for April are $40,000. The cost per equivalent unit is $40,000 / 12,000 = $3.33. However, since the question asks for the FIFO method, we only consider the costs added in April, which are $40,000 for 10,000 units completed, resulting in $4.00 per equivalent unit.