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 materials using the FIFO method would be closest to:
A)$0.9167
B)$3.0000
C)$3.5833
D)$7.2500

Question

Quizplus · Accepted Answer

Under the FIFO method, the cost per equivalent unit for materials is calculated by dividing the current period's material costs by the equivalent units for materials. The equivalent units for materials are the units started and completed during the period plus the ending inventory units, since materials are added at the beginning. Therefore, the equivalent units for materials are 10,000 (completed) + 4,000 (ending inventory) = 14,000 units. The cost per equivalent unit for materials is $36,000 / 12,000 = $3.0000.